August 2010
Beginner
251 pages
7h 20m
English
Content preview from Principles of Quantitative Development
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QUIZ
- What are the main categories of risk that banks strive to manage?
- Classify the following events into the three types of risk:
- (a) Because of the 9/11 attack, the stock market takes a dip. The value of your portfolio goes down.
- (b) Because of an earthquake in Taiwan, your counterparty suffers a catastrophic collapse from which they cannot recover. You lose money.
- (c) Because of the same earthquake, your Taiwan operations suffer prolonged closure. You cannot access your counterparty information and you lose money.
- What are the strategies to mitigate the risks involved in each of the scenarios in question 2?
- Prove mathematically that taking a two-day average of the first-order market sensitivities in P/L explanation is equivalent to considering the second-order sensitivities.
- What is the difference between the product control and the market risk management given that both of them worry about trade PVs?
- Check your understanding of the following business units and their functions:
- (a) Rates management
- (b) Credit risk management
- (c) Static data management
- (d) Market risk – analytics
- (e) Documentation.
- What is the difference between credit risk and settlement risk?
1 See Quiz question.
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