［2008］Topic 36: A Firm-Wide Approach to Risk Management相关习题 access, capacity, relevant, capital

Baran

AIM 3: Evaluate when VAR or CFAR is the more appropriate measure of risk.

 

1、Cash flow at risk (CAR) is most relevant to a nonfinancial firm that:

A) holds substantial liquid financial assets.
 
B) has unused borrowing capacity.
 
C) depends solely on its cash flow to fund new projects.
 
D) has ready access to capital markets.

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Baran

The correct answer is A

Commissions on listed derivatives are quite small compared to the other costs listed.

Baran

The correct answer is D

The new cash flow volatility is [Var(CE)+Var(CN)+2Cov(CE,CN)]1/2 = [502+202+2(.7)(50)(20)]1/2 =65.57. ΔCAR = ΔVolatility x 1.65 = 1.65 x (65.57 –50) =25.69.

Baran

AIM 6: Describe the process of CFAR and VAR allocations to the existing activities of the firm.

 

1、If the standard deviation of the market’s returns is 5.8%, the standard deviation of a stock’s returns is 8.2%, and the covariance of the market’s returns with the stock’s returns is 0.003, what is the beta of the stock?

A) 1.07.
 
B) 0.89.
 
C) 0.05.
 
D) 1.12.

Baran

 The correct answer is B

The formula for beta is: (Covstock,market)/(Varmarket), or (0.003)/(0.058)2 = 0.89.

Baran

AIM 9: Explain the limitations on project selection and the use of derivative instruments as ways to decrease VAR/CFAR.

1、Limitations on the use of derivatives to reduce risk include all of the following EXCEPT:

A) commissions on derivative trades.
 
B) costs of customization.
 
C) credit risk premiums in derivative prices. 
 
D) problems of moral hazard.

Baran

The correct answer is B

The VAR impact of a trade in a diversified portfolio can be calculated based on the asset betas, the size of the trade, and the expected returns of each assets. Correlation between the assets does not enter into the calculation. Note that if the portfolio were not well-diversified, standard deviation would be the relevant measure of risk rather than beta, and correlation would explicitly enter the calculation.

Baran

8、For a trade that is small relative to portfolio size, which of the following tends to decrease the VAR of the portfolio?

Purchasing an asset that has a higher beta relative to the portfolio than the asset sold.
Purchasing an asset that has a higher expected return relative to the portfolio than the asset sold.
Purchasing an asset that has a lower beta relative to the portfolio than the asset sold.
Purchasing a low volatility asset.
A) I and II only.
 
B) II and III only.
 
C) III only.
 
D) II, III, and IV only.

Baran

The correct answer is B

A trade decreases VAR if the asset bought has a lower beta coefficient with respect to the portfolio than the asset sold, or if it has a higher expected return. The impact of volatility alone cannot be determined without knowledge of the correlation with other portfolio assets.