2007 FRM － Mock Exam 模考试题 (106- 110)

106. Suppose you are holding 100 Wheelbarrow Company shares with a current price of USD 50. The daily historical mean and volatility of the return of the stock is 1% and 2%, respectively. The bid-ask spread of the stock varies over time. The daily historical mean and volatility of the spread is 0.5% and 1%, respectively. Calculate the daily liquidity-adjusted VaR (LVaR) at 99% confidence level (both the return and spread of the stock are normally distributed):

a. USD 254

b. USD 229

c. USD 325

d. USD 275

107. Consider the following potential operational risks. Due to a rogue trader, we estimate that over one-year period there is a 10% chance we could lose anywhere between EUR 0 and EUR 100 million (equal probability for all points within that range and 0 probability of any losses outside that range). Due to model risk, we estimate that over a one-year period there is a 20% chance that we will lose EUR 25 million normally distributed with a standard deviation of EUR 5 million. Which of the following statements is true?

a. The expected loss from a rogue trader is less than the expected loss from model risk.

b. The expected loss from a rogue trader is greater than the expected loss from model risk.

c. The maximum unexpected loss from a rogue trader at the 95% confidence level is less than the maximum unexpected loss at the 95% confidence level from model risk.

d. The maximum unexpected loss at the 95% level from a rogue trader is greater than the maximum unexpected loss at the 95% level from model risk.

108. The risk-free rate is 5% per year and a corporate bond yields 6% per year. Assuming a recovery rate of 75% on the corporate bond, what is the approximate market implied one-year probability of default of the corporate bond?

a. 1.33%

b. 4.00%

c. 8.00%

d. 1.60%

109. A mutual fund investing in common stocks has adopted a liquidity risk measure limiting each of its holdings to a maximum of 30% of its 30-day average value traded. If the fund size is USD 3 billion, what is the maximum weight that the fund can hold in a stock with a 30-day average value traded of USD 2.4 million?

a. 24.00%

b. 0.08%

c. 0.024%

d. 80.0%

110. Bank A makes a USD 10 million five-year loan and wants to offset the credit exposure to the obligor. A five-year credit default swap (CDS) with the loan as the reference asset trades on the market at a swap premium of 50 basis points paid quarterly. In order to hedge its credit exposure, Bank A

a. sells the five-year CDS and receives a quarterly payment of USD 50,000.

b. buys the five-year CDS and makes a quarterly payment of USD 12,500.

c. buys the five-year CDS and receives a quarterly payment of USD 12,500.

sells the five-year CDS and makes a quarterly payment of USD 50,000.