2007 FRM － Mock Exam 模考试题 (26 - 30)

26. Consider a portfolio consisting of USD 10 million of Intel shares and USD 5 million of GE shares. The returns on the two stocks have a bivariate normal distribution with a correlation of 0.3. The daily return volatility of Intel and GE is 2% and 1%, respectively. The standard deviation of daily changes in the value of the Intel position is USD 0.2 million, and the standard deviation of daily changes in the value of the GE position is USD 0.05 million. The daily VaR at the 99% confidence level is USD 0.5131 million. What is the incremental daily VaR of the portfolio for a small increase in the position on Intel shares over a one-day horizon at 99% confidence level?

a. USD 0.0455 million

b. USD 2.275 million

c. USD 0.0453 million

d. USD 0.0195 million

27. As an approximation, it is true that

a. Default swap spread = return of a risky bond – return of a risk-free bond.

b. Default swap spread = return of a risky bond + return of a risk-free bond.

c. Default swap spread = return of a risky bond * (1- return of a risk-free bond.)

d. Default swap spread = return of a risky bond * return of a risk-free bond.

28. The information ratio of the Sterole US Fund for 2006 against the S&500, its benchmark index, is 1. For the same time period, the fund’s Sharpe ratio is 2, the fund has tracking error of 7% against the S& 500, and the standard deviation of fund returns is 5%. The risk-free rate in the US is 4%. Calculate the return for the S& 500 during the time period.

a. 11%

b. 14%

c. 5%

d. 7%

29. An investment bank uses the Exponentially Weighted Moving Average (EWMA) technique with of 0.9 to model the daily volatility of a security. The current estimate of the daily volatility is 1.5%. The closing price of the security is USD 20 yesterday and USD 18 today. Using continuously compounded returns, what is the updated estimate of the volatility?

a. 3.62%

b. 1.31%

c. 2.96%

d. 5.44%

30. Your bank has chosen to use the advanced Internal Rating Based Approach under Basel II. The bank is contemplating a large securitization of low-quality loans that are currently on its balance sheet. You are concerned about whether the securitization will provide you with regulatory capital relief. Which one of the following approaches would be the most efficient in reducing the bank’s regulatory capital?

a. The bank sets up an Special Purpose Vehicle (SPV) that issues securities. All proceeds from selling these securities are invested in a portfolio of equities. The SPV sells protection to the bank through a credit default swap on the loans in the bank’s portfolio.

b. The bank sells the loans to an SPV and keeps an equity piece representing 8% of the value of the loans.

c. The bank sells the loans to an SPV that issues securities. These securities issued are then sold to third-party investors. The bank indicates to some investors that if credit quality of the loans declines significantly, the bank will try to help the investors, but specifies that the bank is unwilling to provide a contractual guarantee.

d. The bank forgoes the securitization and buys a credit default swap on the loans from an AAA-rated provider.

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