Quant Crash Course - Quiz 3

6 Questions | Total Attempts: 17

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Crash Quizzes & Trivia

This quiz tests you on material covered within Part 3: definitions & types of capital; risk framework built around capital; differences between economic and regulatory capital; capital adequacy; transactions-driven versus expectations-driven limits.


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Questions and Answers
  • 1. 
    1.       Link each item in column 1 with the corresponding item in column 2: Column 1 Column 2 I. Normal operating conditions i. Most likely loss II. Emergency Management Conditions ii. Economic Capital III. Expected Value iii. Tail shock loss
    • A. 

      I &i, II&ii, III&iii

    • B. 

      I&ii, II&i, III&iii

    • C. 

      I&iii, II&i, III&ii

    • D. 

      I&ii, II&iii, III&i

    • E. 

      I&i, II&iii, III&ii

  • 2. 
    Limits help set?  
    • A. 

      Risk appetite

    • B. 

      Risk capacity

    • C. 

      Risk preference

    • D. 

      Risk control and compliance

    • E. 

      None of the above

  • 3. 
    Economic capital is?
    • A. 

      Capital specified by the regulator based on risks the industry is exposed to

    • B. 

      Capital assessed by the entity based on the risks that it is exposed to

    • C. 

      Operating capital calculated by the entity

    • D. 

      Capital to cover the most likely expected loss for the entity

    • E. 

      None of the above

  • 4. 
    Regulatory capital is?
    • A. 

      Used to assess capital adequacy of the entity by the regulator

    • B. 

      Used to cover tail risk of the entity

    • C. 

      Used to signal worst case loss to the regulator

    • D. 

      Used to cover the most likely expected loss for the entity

    • E. 

      None of the above

  • 5. 
    The risk management framework, i.e. risk policy, models, metrics, limits, etc is a static process, meaning that once it is set it will remained unchanged over time.
    • A. 

      True

    • B. 

      False

  • 6. 
    Which of the following is not a transactions-driven limit?
    • A. 

      Stop Loss

    • B. 

      Book Size

    • C. 

      Value at Risk

    • D. 

      Capital Loss

    • E. 

      Slippage