[2008]Topic 45: Unexpected Loss 相关习题 unexpected, standard, factors

aianjie

 

AIM 1: Describe factors contributing to expected and unexpected loss.

1、Unexpected loss is best characterized as:

A) variance of expected loss.

B) variance of unanticipated loss.

C) standard deviation of expected loss.

D) standard deviation of unanticipated loss.

aianjie

 

The correct answer is C

Unexpected loss is defined as the variation in potential loss around the expected or average loss level.

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2、Which of the following is TRUE concerning expected loss and unexpected loss from a bank loan portfolio?

A) Expected loss > unexpected loss.

B) Indeterminate.

C) Expected loss < unexpected loss.

D) Expected loss = unexpected loss.

aianjie

 

The correct answer is B

Based on the relative magnitudes of expected loss and its standard deviation, i.e. unexpected loss, expected loss may be greater, less or equal to unexpected loss. Without further information, 'indeterminate' is the best answer choice.

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3、Under the option view of the firm, which of the following is TRUE?

A) The firm will default on its obligations if the value of the firm exceeds the value of the debt.

B) The firm will default on its obligations if the value of its equity exceeds the value of the debt.

C) The firm will default on its obligations if the value of its equity is less than the value of the debt.

D) The firm will default on its obligations if the value of the firm is less than the value of the debt.

aianjie

 

 

The correct answer is D

Under the option view of the firm, the strike price is set at the level of outstanding debt. As long as the value of the firm exceeds the outstanding debt (strike price), the firm will repay its obligation.

 

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4、Which of the following statements about loan returns is (are) TRUE?

Unexpected loss on the loan can result from default.

Unexpected loss on the loan can result from credit migration.

Loan returns increase as recovery rates decrease.

A) I and II only.

B) I only.

C) II and III only.

D) I, II, and III.

aianjie

 

The correct answer is A

Default and credit migration (downgrade) will decrease loan return. Similarly, loan returns increase as recovery rates increase.

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AIM 2: Define, calculate and interpret the unexpected loss on an asset.

1、Decreasing the recovery rate will do which of the following to unexpected loss?

A) Recovery rate does not influence UL.

B) Increase UL.

C) Decrease UL.

D) No change.

aianjie

 

The correct answer is B

Reducing the recovery rate increases the variability around the expected loss level, increasing standard deviation (unexpected loss).