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36. Which of the following statements about the Basel II capital requirements is false?
A. It increases the risk sensitivity of minimum capital requirements for internationally active banks.
B. It only addresses Credit Risk and Market Risk.
C. ffice:smarttags" />United States insurance companies are not required to comply with Basel II capital requirements.
D. Banks are not allowed to use their internal models for credit risk in determining the capital requirements for credit risk.
Correct answer is B
In addition to addressing capital requirements for credit and market risk, the Basel II capital requirements also address operational risk.ffice ffice" />
The Basel II capital requirements are more risk-sensitive, apply to internationally active banks which would not include US insurance companies and allow banks to use internal models for credit risk.
37. The Big Bucks Hedge fund has the following description of its activities. It uses simultaneous long and short positions in equity with a net beta close to zero.
Which of the following statements about Big Bucks are correct?
i) It uses a directional strategy.
ii) It is a relative value hedge fund.
iii) This fund is exposed to idiosyncratic risks.
A. i and ii
B. ii and iii
C. i and iii
D. ii only
Correct answer is B
The fund is an equity market neutral hedge fund.
This type of fund is nondirectional and is exposed to idiosyncratic, stock specific risks.
Type of Question: Risk Management and Investment Management (risks of specific strategies)
38. Which of the following statements about the Treynor ratio is correct?
A. The Treynor ratio considers both systematic and unsystematic risk of a portfolio.
B. The Treynor ratio is equal to the excess return of a portfolio over the risk-free rate divided by the total risk of the portfolio.
C. The Treynor ratio can be used to appraise the performance of well-diversified portfolios.
D. The Treynor ratio is derived from portfolio theory since it assesses a portfolio's excess return relative to its risk.
Correct answer is C
A is incorrect ? Treynor ratio considers only systematic risk of a well-diversified portfolio
B is incorrect ? Treynor ratio denominator is beta of the portfolio
C is correct ? this statement is correct
D is incorrect ? Treynor ratio is derived from CAPM and not portfolio theory
Reference: Portfolio Theory and Performance Analysis Chapter 4
Type of Question: Risk Management and Investment Management (return metrics)
39. Hedge fund XYZ has monthly returns that are extremely smooth, so that a portfolio of the cumulative return on an investment in the funds (in logs) looks almost like a straight line. Which of the following implications of the smoothness of the returns is false?
A. It increases the calculated Sharpe ratio.
B. It has the effect of lowering volatility and market beta.
C. It will introduce negative serial correlation.
D. It is typical of investments in illiquid assets.
Correct answer is C
A is true
B is true, smoothing of returns will lower volatility and market beta, increase Sharpe ratio and introduce positive serial correlation as a problem
C is false. Positive serial correlation will be introduced
D is true ? marking of assets to less than actual value (smoothing of returns) is usually applied on illiquid assets as pricing of such assets is subjective | 
发表于 2009-6-13 14:59
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