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1. A portfolio's 1-day VaR at the 99% confidence level is $250m. What is the annual volatility of the portfolio?
(assuming 250 days in the year)
A) $107.5m
B) $1,699.4m
C) $3,952.8m
D) $2,410.3m
2. Calculate the 1-year 99% credit VaR of a portfolio of two bonds, each with a value of $1m, and the probability of default of 1% each over the next year. Assume the recovery rate to be zero, and the defaults of the two bonds to be uncorrelated to each other.
A) 980000
B) 0
C) 1980000
D) 20000
3. The sensitivity (delta) of a portfolio to a single point move in the value of the S&P500 is $100. If the current level of the S&P500 is 2000, and has a one day volatility of 1%, what is the value-at-risk for this portfolio at the 99% confidence and a horizon of 10 days? What is this method of calculating VaR called?
A) $4,660, Monte Carlo simulation VaR
B) $14,736, historical simulation VaR
C) $14,736, parametric VaR
D) $4,660, parametric VaR
4. Which of the following are attributes of a robust stress testing programme at a bank?
A) Robust systems infrastructure
B) Written policies and procedures
C) All of the above
D) Data of appropriate quality and granularity
5. A risk analyst uses the GARCH model to forecast volatility, and the parameters he uses are # = 0.001%, # =
0.05 and # = 0.93. Yesterday's daily volatility was calculated to be 1%. What is the long term annual volatility under the analyst's model?
A) 3.54 %
B) 0.22 %
C) 7.94 %
D) 0.25 %
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: A | Question # 3 Answer: C | Question # 4 Answer: C | Question # 5 Answer: A |
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