Question 1

Which one of the following four statements correctly identifies the Basel II Accord's

definition of operational risk?

Options :

A : Operational risk is all the risk that is not captured by market and credit risks.

B :

Operational risk is the risk of loss resulting from inadequate or failed processes, people

and systems or from external events.

C : Operational risk is a risk arising from execution of a company-s business functions.

D :

Operational risk is a form of risk that summarizes the risks a company or firm

undertakes when it attempts to operate within a given field or industry.

Answer: B

Question 2

DeltaFin wants to develop a control scoring method for its RCSA program. Which of the

following statements regarding scoring methods are correct?

I. DeltaFin can develop a control scoring method that assesses both the design and the

performance of the control.

II. DeltaFin can combine the design and performance scores for each control to produce an

overall control effectiveness score.

III. DeltaFin can use the control performance scores to compute an overall risk severity

score.

IV. DeltaFin can determine its own appropriate control scoring method.

Options :

A : I only

B : II and III

C : I, II and IV

D : II, III, and IV

Answer: C

Question 3

Which one of the following is a typical source of funding for a commercial banks assets?

Options :

A : Consumer deposits

B : Cash

C : Commercial lending

D : Commodities markets

Answer: A

Question 4

Which of the following statements about the option gamma is correct? Gamma is the

I. Second derivative of the option value with respect to the volatility.

II. Percentage change in option value per percentage change in the price of the underlying

instrument.

III. Second derivative of the value function with respect to the price of the underlying

instrument.

IV. Rate of change of the option delta with respect to changes in the underlying price.

Options :

A : I only

B : II and III

C : III and IV

D : II, III, and IV

Answer: C

Question 5

As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in value against other currencies

Options :

A : Reduces, reduces, appreciate

B : Reduces, reduces, depreciate

C : Increases, reduces, appreciate

D : Reduces, increases, depreciate

Answer: A

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