A. the oil market went from backwardation to contango
B. the oil market went from strong contango to weak contango
C. the oil market went from contango to backwardation
D. the oil market went from weak backwardation to strong backwardation
A. The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)
B. The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors
C. The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors
D. The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital
A. It failed due to the poor quality of its assets
B. A run on its deposits by bank customers
C. Using a combination of subprime mortgage loans and credit cards
D. Low lending standards and bad quality acquisitions
A. only possess the required skills and/or certification to complete the risk assessment / management work at hand
B. learn from a qualified risk management practitioner
C. maintains and improve their professional competence and strive to maintain and improve the competence of other risk professionals
D. only improve their PERSONAL professional competence
A. Alerted senior management to the problems before the major losses occurred
B. Helped very little as Nick Leeson hid many trades
C. Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics
D. Been used if senior management had ever seen it
A. transfers the total risk at the usual reinsurance price
B. transfers the total risk at less cost than traditional reinsurance
C. transfers only a limited amount of risk at less cost than traditional reinsurance
D. transfers only a limited amount of risk at the usual reinsurance price
A. Had a Board of Directors that was unaware of the true nature of trading activities
B. Had a separation of duties between trading and back office
C. Was not dealing in derivatives
D. Had a risk management infrastructure that was credited with doing its' job well, despite the losses
A. Deposit taking activities which generated net interest income.
B. The provision of fee based services to its customers.
C. Lending to consumers and small businesses.
D. Complex derivative trades based on volatility indices.
A. to buy puts and sell calls
B. to sell puts and buy calls
C. to buy calls and sell puts
D. to sell calls and buy puts
A. Time value was not taken into account during the contract valuation process
B. No properly defined risk management policies in place and general lack of oversight by senior management
C. Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses
D. Senior management in China were aware of the positions but did not understand the complexities of risk managing them
