1) Half life of Vasicek - independent of the original distance
2) JP Morgan - ignored & raised risk limits
3) Market maker earns illiq premium even after all the costs
4) Fundamental review of trading book - can shift assets from trading to banking (vice versa) only under strict circumstances
5) NSFR (currently at 1.05) decreases when wholesale loan matched dollar for dollar with mortgage loan
6) RAROC - 8.8%
7) Liq-adjusted Var: difference between exogenous vs constant spread
8) Duration mapping: increase in interest rate reduces VaR
9) Stress testing: -2% vs -2.7%. I chose the latter. Not sure
10) Illiquid returns underestimates beta
11) How to account for lliquidity when running a model (aggregating data, lags on dependent variables, etc.)
Other options were wrong. (unfiltering was described as opposite). Hesitated between aggregating data and lag on dependent V.
12) Market risk charge using stress VAR
13) Change in CVA given the 3 years of pd, EAD, LGD values. In the second year there was a collateral of 12%
Reduced LGD by proportion covered by collateral when calculating new CVA starting from 2nd yr
14) CVA where discount factor LIBOR was regressed against another factor
15) Cyber security, what should be first step of CEO? Classify info value
16) Q-Q plot: Fat tails. I got this wrong
17) Calculate DD using KMV model (long formula) and map to respective probability to default bucket. 2.2 or something (use long formula)
18) Optimal allocation among managers using information ratio and TE and assign the left over to the index.
6% or something.
Use the ideal allocation formula: wi * TEi = (IRi / IRp) * TEp
19) Expected shortfall using 96%-99% VAR value
20) One question on netting factor calculation
21) One question on netting and other without netting.
22) Bond valuation using binomial tree
23) Wrong way risk for both options
24) Operational risk capital charge using basic indicator approach. (average the positive years and multiply by 15%?)
25) One where Frechet distribution was the answer (Extreme Value Theory)
26) One where I selected negative binomial distribution for frequency, lognormal for body and pareto distribution for tail.
I didn't see poisson, log, pareto as an option.
27) Central Clearing party where I selected 50 million as left over contribution share after one party defaulted.
28) One where an option was increase in default affects senior more
I chose the same answer but not sure about this. Anybody confirm?
29) Definition of step up
I still don't know step-up. loll anybody know the answer?
30) What leads to decrease in credit of junior tranche - either margin step-up for all tranches or increase in notional of senior: increase in notional of senior because of less OC. Margin step-up only enhances credit?
31) LIBOR 1 year forward calculation question
Spent too much time on this Q.. C and D were very close to each other, so I guessed 'D'
32) 33) 34) 35) MVAR CVAR Incremental VAR, etc.
There was a Q about selling a specified amount of portfolio and which factor needs to be considered. I chose incremental because I remember the amount was pretty big. Not sure.
36) Mean Reversion of 10 yr correlations
difference between Forecast following the end month and mean is less in period 1 or 2
37) Long Corn WWR (other options included short in a bank stock and long a call on oil with a plane company)
38) Exception Problem (fail to reject? 95% VaR at 99% confidence)
Fail to reject
39) Last question - liquidity decrease will increase model risk
40) Prepayment Mortgages (PSA, etc)
SMM
41) Initial Cost of CDS A is higher than B (three different curves of probability of default were given and there were several options relating them)
Is this the answer? Why is higher PD after 1 year wrong?
42) Ho-Lee drift - 2 period interest. Calculate what is the minimum volatility that will equal to rate 0% in the lowest node
r0 + (c1 + c2)dt - 2*sigma*sqrt(dt) = 0 solve for sigma
43) Huge Case #1 (one of the options was pension fund had RWR wi(th the company)
No idea
44) Var Position 100000 when EUR were removed
709k?
45) Var two stocks one with with sigma 8%, other with sigma 6% and correlations equal to 65% and 70%, respectively. Which to choose, X or Y?
46) Stress scenario developed by regulators or he can use his own parameters? (house price index exposure and domestic gdp)
47) Probability of default (AB, AC, AD) correlation matrix 0, -0.5, 0.5 (this was the first question)
Highest joint PD - highest correlation
48) WCDR (10%, 15%, 25%?)
10%. One of you mentioned mat adjustment but that formula is so long with many constants so that it's not likely.
49) Put & call delta what happen when the stock price goes up
Both inc
50) Central Bank lending or regulation (which one would best suit the situation)?
One where banks refrain from lending to one another and stock cash
2) JP Morgan - ignored & raised risk limits
3) Market maker earns illiq premium even after all the costs
4) Fundamental review of trading book - can shift assets from trading to banking (vice versa) only under strict circumstances
5) NSFR (currently at 1.05) decreases when wholesale loan matched dollar for dollar with mortgage loan
6) RAROC - 8.8%
7) Liq-adjusted Var: difference between exogenous vs constant spread
8) Duration mapping: increase in interest rate reduces VaR
9) Stress testing: -2% vs -2.7%. I chose the latter. Not sure
10) Illiquid returns underestimates beta
11) How to account for lliquidity when running a model (aggregating data, lags on dependent variables, etc.)
Other options were wrong. (unfiltering was described as opposite). Hesitated between aggregating data and lag on dependent V.
12) Market risk charge using stress VAR
13) Change in CVA given the 3 years of pd, EAD, LGD values. In the second year there was a collateral of 12%
Reduced LGD by proportion covered by collateral when calculating new CVA starting from 2nd yr
14) CVA where discount factor LIBOR was regressed against another factor
15) Cyber security, what should be first step of CEO? Classify info value
16) Q-Q plot: Fat tails. I got this wrong
17) Calculate DD using KMV model (long formula) and map to respective probability to default bucket. 2.2 or something (use long formula)
18) Optimal allocation among managers using information ratio and TE and assign the left over to the index.
6% or something.
Use the ideal allocation formula: wi * TEi = (IRi / IRp) * TEp
19) Expected shortfall using 96%-99% VAR value
20) One question on netting factor calculation
21) One question on netting and other without netting.
22) Bond valuation using binomial tree
23) Wrong way risk for both options
24) Operational risk capital charge using basic indicator approach. (average the positive years and multiply by 15%?)
25) One where Frechet distribution was the answer (Extreme Value Theory)
26) One where I selected negative binomial distribution for frequency, lognormal for body and pareto distribution for tail.
I didn't see poisson, log, pareto as an option.
27) Central Clearing party where I selected 50 million as left over contribution share after one party defaulted.
28) One where an option was increase in default affects senior more
I chose the same answer but not sure about this. Anybody confirm?
29) Definition of step up
I still don't know step-up. loll anybody know the answer?
30) What leads to decrease in credit of junior tranche - either margin step-up for all tranches or increase in notional of senior: increase in notional of senior because of less OC. Margin step-up only enhances credit?
31) LIBOR 1 year forward calculation question
Spent too much time on this Q.. C and D were very close to each other, so I guessed 'D'
32) 33) 34) 35) MVAR CVAR Incremental VAR, etc.
There was a Q about selling a specified amount of portfolio and which factor needs to be considered. I chose incremental because I remember the amount was pretty big. Not sure.
36) Mean Reversion of 10 yr correlations
difference between Forecast following the end month and mean is less in period 1 or 2
37) Long Corn WWR (other options included short in a bank stock and long a call on oil with a plane company)
38) Exception Problem (fail to reject? 95% VaR at 99% confidence)
Fail to reject
39) Last question - liquidity decrease will increase model risk
40) Prepayment Mortgages (PSA, etc)
SMM
41) Initial Cost of CDS A is higher than B (three different curves of probability of default were given and there were several options relating them)
Is this the answer? Why is higher PD after 1 year wrong?
42) Ho-Lee drift - 2 period interest. Calculate what is the minimum volatility that will equal to rate 0% in the lowest node
r0 + (c1 + c2)dt - 2*sigma*sqrt(dt) = 0 solve for sigma
43) Huge Case #1 (one of the options was pension fund had RWR wi(th the company)
No idea
44) Var Position 100000 when EUR were removed
709k?
45) Var two stocks one with with sigma 8%, other with sigma 6% and correlations equal to 65% and 70%, respectively. Which to choose, X or Y?
46) Stress scenario developed by regulators or he can use his own parameters? (house price index exposure and domestic gdp)
47) Probability of default (AB, AC, AD) correlation matrix 0, -0.5, 0.5 (this was the first question)
Highest joint PD - highest correlation
48) WCDR (10%, 15%, 25%?)
10%. One of you mentioned mat adjustment but that formula is so long with many constants so that it's not likely.
49) Put & call delta what happen when the stock price goes up
Both inc
50) Central Bank lending or regulation (which one would best suit the situation)?
One where banks refrain from lending to one another and stock cash
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