[管理學(xué)]金融風(fēng)險(xiǎn)管理師frm考試answer-文庫(kù)吧在線文庫(kù)
【正文】 xpected recovery rate is 40%. Assuming an allin cost of funds of LIBOR for the lender, what would be the fair price for the loan?a. LIBOR + 120bpb. LIBOR + 240bpc. LIBOR 120bpd. LIBOR + 160bpANSWERExample : FRM Exam 2002—Question 96a) The credit spread should be y? ? y = π(1 ? f ). Thus, π(1 ? f ) = 2%(1 ? 40%) = %. The spread over LIBOR should be 120 bp.27. EXAMPLE : FRM EXAM 2002—QUESTION 93Which transaction does not result in a longterm credit risk for party A?a. Party A makes an unsecured loan to party B.b. Party A is a ?xedprice receiver in an interest rate swap from party B.c. Party A buys a call option on September wheat from party B.d. Party A sells a put option on the Samp。P rating of BBB and a Moody’s rating of Ba.c. Bond C carries an Samp。18 millionb. 163。22 millionc. 163。P rating of BBB and a Moody’s rating of Baa.d. None of the above.ANSWERExample : FRM Exam 2004—Question 27c) The lowest investmentgrade ratings are BBB and Baa.23. EXAMPLE : FRM EXAM 2002—QUESTION 110If Moody’s and Samp。P will be lower than the average default rate on bonds rated by Moody’s asa. Baa3b. Ba1c. Bad. Ba3ANSWERExample : FRM Exam 2002—Question 110d) The BB rating by Samp。100(1 ? ) = , 163。T pension plan reports a projected benefit obligation of $ billion. If the discount rate decreases by %, this liability will increase by $ billion. Based on this information, the liabilities behave like aa. Short position in the stock marketb. Short position in cashc. Short position in a bond with maturity of about 9 yearsd. Short position in a bond with duration of about 9 yearsANSWERExample : Pension Liabilitiesd) We can pute the modified duration of the liabilities as So, the liabilities behave like a short position in a bond with a duration around nine years. Answers a) and b) are incorrect because the liabilities have fixed future payoffs, which do not resemble cash flow patterns on equities nor cash. Answer c) is incorrect because the duration of a bond with a nineyear maturity is less than nine years. For example, the duration of a 6% coupon par bond with nineyear maturity is seven years only.7. EXAMPLE : PENSION IMMUNIZATIONA pension plan reports $12 billion in assets and $10 billion in present value of the benefit obligations. Future pension benefits are indexed to the rate of inflation. To immunize its liabilities, the plan shoulda. Invest $12 billion of assets in fixedcoupon longterm bondsb. Invest $10 billion of assets in fixedcoupon longterm bondsc. Invest $10 billion of assets in cashd. Invest $10 billion of assets in Treasury InflationProtected SecuritiesANSWERExample : Pension Immunizationd) Immunization occurs when assets are invested so as to perfectly hedge changes in liabilities. So, the amount to invest is $10 billion, which is the value of liabilities.In this case, we are told that the pension payments are indexed to the rate of inflation. Because the liabilities are tied to inflation, immunization requires that the assets should react in a similar way to inflation. This can be achieved with Treasury inflationprotected securities (TIPS).8. EXAMPLE : LEVERAGE AND HEDGE FUNDSA hedge fund with $100 million in equity is long $200 million in some stocks and short $150million in others. The gross and net leverage are, respectively,a. and b. and c. and d. and ANSWERExample : Leverage and Hedge Fundsc) The gross leverage is (200 + 150)/100 = . The net leverage is (200 ? 150)/100 = .9. EXAMPLE : HEDGING AND RETURNSContinuing with the previous question, assume the stock market went up by 20%last year. Ignore the riskfree rate and idiosyncratic risk, and assume the average beta of both long and short positions is one. Over the same period, the return on the fund should bea. 20%b. 15%c. 10%d. 5%ANSWERExample : Leverage and Returnsc) The net return on the stock portfolio is (βL$200 ? βS$150) 20%. With betas of 1, this is $10 million. Given that the equity is $100 million, the rate of return is 10%. The rate of return is less than the market because most of the exposure to the market is hedged.10. EXAMPLE : FRM EXAM 2004—QUESTION 2A relative value hedge fund manager holds a long position in Asset A and a short position in asset B of roughly equal principal amounts. Asset A currently has a correlation with asset B of . The risk manager decides to overwrite this correlation assumption in the variancecovariance based VAR model to a level of . What effect will this change have on the resulting VAR measure?a. It increases VAR.b. It decreases VAR.c. It has no effect on VAR, but changes profit or loss of strategy.d. Do not have enough information to answer.ANSWERExample : FRM Exam
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