Valid 2016-FRR Dumps shared by ExamDiscuss.com for Helping Passing 2016-FRR Exam! ExamDiscuss.com now offer the newest 2016-FRR exam dumps, the ExamDiscuss.com 2016-FRR exam questions have been updated and answers have been corrected get the newest ExamDiscuss.com 2016-FRR dumps with Test Engine here:
Access 2016-FRR Dumps Premium Version
(390 Q&As Dumps, 35%OFF Special Discount Code: freecram)
<< Prev Question Next Question >>
Question 81/161
A proprietary trading desk for a large bank hedges an Arab light OTC forward position with Brent crude oil forwards. The trading desk benefits from using the most liquid OTC market to hedge, the market for the Brent crude, but hedging its using the Brent contract, exposes itself to the following type of risk:
Correct Answer: A
When a proprietary trading desk hedges an Arab light OTC forward position with Brent crude oil forwards, they face basis risk. This is because the underlying commodities (Arab light and Brent crude oil) are different and may not move perfectly in sync, leading to a potential mismatch in the hedge.
References
Verified based on the discussion of basis risk in commodity trading provided in the book "How Finance Works".
References
Verified based on the discussion of basis risk in commodity trading provided in the book "How Finance Works".
- Question List (161q)
- Question 1: Modified duration of a bond measures:...
- Question 2: Why is stress testing a valuable part of credit risk assessm...
- Question 3: Which of the following statements describes a bank's reasons...
- Question 4: Which one of the four following activities is NOT a componen...
- Question 5: Which of the following bank events could stress the bank's l...
- Question 6: Alpha Bank determined that Delta Industrial Machinery Corpor...
- Question 7: Which one of the following is an advantage of using a daily ...
- Question 8: When a credit risk manager analyzes default patterns in a sp...
- Question 9: How could a bank's hedging activities with futures contracts...
- Question 10: Which of the following are among the main uses of risk repor...
- Question 11: Which of the following are typical properties of a statistic...
- Question 12: The operational risk policy should include: I. The firm's de...
- Question 13: Which one of the following four exotic option types has anot...
- Question 14: In early March, an energy trader takes a long position in na...
- Question 15: Which one of the following four statements regarding the ana...
- Question 16: According to the principles of the Basel II Accord, the impl...
- Question 17: Which one of the following four statements presents a challe...
- Question 18: Which of the following statements about a bank's behavior re...
- Question 19: When operating in a heavily traded currency, a commercial an...
- Question 20: While contractually, depositors are not required to keep liq...
- Question 21: DeltaFin wants to develop a control scoring method for its R...
- Question 22: Which one of the four following statements describes a speci...
- Question 23: Which one of the following four statements regarding floatin...
- Question 24: A portfolio manager is interested in computing risk measures...
- Question 25: A bank has a large number of auto loans and would prefer to ...
- Question 26: Which one of the following financial instruments is subject ...
- Question 27: The pricing of credit default swaps is a function of all of ...
- Question 28: A corporate bond was trading with 2%probability of default a...
- Question 29: Gamma Bank has a significant number of retail customers and ...
- Question 30: By lowering the spread on lower credit quality borrowers, th...
- Question 31: By foreign exchange market convention, spot foreign exchange...
- Question 32: A risk manager is considering how to best quantify option pr...
- Question 33: Which one of the following four statements regarding the bas...
- Question 34: Which of the following correctly identifies reasons for coll...
- Question 35: The Sarbanes-Oxley Act includes one of the following four re...
- Question 36: Which one of the following four examples would not be consid...
- Question 37: What does a bank normally use to cover expected credit losse...
- Question 38: To protect the oranges harvest price level, a farmer needs t...
- Question 39: After entering the securitization business, Delta Bank incre...
- Question 40: A credit rating analyst wants to determine the expected dura...
- Question 41: Which statements correctly describe the features of using su...
- Question 42: Which of the following attributes of duration gap model typi...
- Question 43: A risk manager is analyzing a call option on the GBP with a ...
- Question 44: Bank Sigma has an opportunity to do a securitization deal fo...
- Question 45: Gamma Bank provides a $100,000 loan to Big Bath retail store...
- Question 46: Which of the following statements regarding CDO-squared is c...
- Question 47: Bank G has a 1-year VaR of USD 20 million at 99% confidence ...
- Question 48: A retail credit score of above 680 is generally considered t...
- Question 49: James Arthur is a customer of a bank who has taken a floatin...
- Question 50: Banks duration match their assets and liabilities to manage ...
- Question 51: A credit risk analyst is evaluating factors that quantify cr...
- Question 52: Securitization is a process by which banks:...
- Question 53: Which of the following factors would typically increase the ...
- Question 54: Which one of the following four alternatives lists the three...
- Question 55: Over a long period of time DeltaBank has amassed a large equ...
- Question 56: Bank Alpha is making a decision about lending 10-year loans ...
- Question 57: Which one of the following four variables of the Black-Schol...
- Question 58: An asset-sensitive bank will have a ___ cumulative gap and w...
- Question 59: Of all the risk factors in loan pricing, which one of the fo...
- Question 60: An associate from the finance group has been identified as a...
- Question 61: The Basel II Accord's operational risk definition excludes a...
- Question 62: Which one of the following four mathematical option pricing ...
- Question 63: Alpha Bank determined that Delta Industrial Machinery Corpor...
- Question 64: Which one of the following statements is an advantage of usi...
- Question 65: All of the following performance statistics typically benefi...
- Question 66: Which one of the following four statements regarding commodi...
- Question 67: US-based BetaBank have accumulated Japanese yen, Japanese go...
- Question 68: Which one of the following four options is NOT a typical com...
- Question 69: James Johnson bought a coupon bond yielding 4.7% for $1,000....
- Question 70: Which one of the following four interest rate related yield ...
- Question 71: BetaFin, a financial services firm, does not have retail bra...
- Question 72: Which one of the following four statements about market risk...
- Question 73: From a risk point of view, which of the following factors wi...
- Question 74: To estimate the interest charges on the loan, an analyst sho...
- Question 75: A customer of EtaBank, Alfred Fall, fell on the marble floor...
- Question 76: To estimate the forward price of oil, a commodity trader wou...
- Question 77: Which of the following statements about the interest rates a...
- Question 78: A financial analyst is trying to distinguish credit risk fro...
- Question 79: Which of the following reports have been suggested by the FD...
- Question 80: Under the Basel II Accord, when using the Basic Indicator Ap...
- Question 81: A proprietary trading desk for a large bank hedges an Arab l...
- Question 82: Alpha Bank estimates that the annualized standard deviation ...
- Question 83: Which of the following statements about the interest rates a...
- Question 84: To hedge equity exposure without buying or selling shares of...
- Question 85: What is a difference between currency swaps and interest rat...
- Question 86: Bank Omega is using futures contracts on a well capitalized ...
- Question 87: Mega Bank holds a $250 million mortgage loan portfolio, whic...
- Question 88: Bank Milo has $4 million in cash and $5 million in loans com...
- Question 89: Which of the following statements explain how securitization...
- Question 90: Which one of the four following non-statistical risk measure...
- Question 91: Why do regulatory standards impose formulaic capital calcula...
- Question 92: Which one of the following inherent biases occurs in scenari...
- Question 93: PV01 is a method of describing interest rate risk. Which one...
- Question 94: What does Pillar 2 of the Basel II Accord focus on?...
- Question 95: The data available to estimate the statistical distribution ...
- Question 96: A large number of traders decide to follow the same trading ...
- Question 97: Under Basel III, the Comprehensive Risk Measure is an increm...
- Question 98: Short-selling is typically associated with the following ris...
- Question 99: Which of the following attributes are typical for early mode...
- Question 100: Foreign exchange rates are determined by various factors. Co...
- Question 101: The retail banking business of BankGamma has an expected P &...
- Question 102: What does correlation between two variables measure?...
- Question 103: Which one of the four following statements about drawdowns i...
- Question 104: Which one of the following statements correctly identifies r...
- Question 105: Which one of the following four option types has two strike ...
- Question 106: Which one of the following four statements correctly defines...
- Question 107: Which one of the four following statements regarding minimum...
- Question 108: What are the add-on losses faced by a bank that is going ban...
- Question 109: To quantify the aggregate average loss for the credi t subpo...
- Question 110: When creating a model to estimate risk, it is important to r...
- Question 111: James Johnson bought a 3-year plain vanilla bond that has yi...
- Question 112: Which of the following statements about endogenous and exoge...
- Question 113: What is the explanation offered by the liquidity preference ...
- Question 114: An options trader for a large institutional investor takes a...
- Question 115: Under Basel III, what is divided by Total Exposure to calcul...
- Question 116: Which one of the following four regulatory drivers for opera...
- Question 117: Interest rate swaps are:
- Question 118: A bank customer can use either a plain vanilla option or an ...
- Question 119: A bank customer expecting to pay its Brazilian supplier BRL ...
- Question 120: For which risk type did the Basel I Accord introduce regulat...
- Question 121: Which one of the following four statements about preferred s...
- Question 122: Which of the following would a bank resort to as a "lender o...
- Question 123: According to Basel II what constitutes Tier 2 capital?...
- Question 124: Which of the following statements is a key difference betwee...
- Question 125: According to Basel II what constitutes Tier 3 capital?...
- Question 126: Bank Muri has $4 million in cash and $5 million in loans com...
- Question 127: Which one of the following four exercise features is typical...
- Question 128: Which of the following risk types are historically associate...
- Question 129: BIS Principles for Sound Liquidity Risk Management and Super...
- Question 130: For two variables, which of the following is equal to the av...
- Question 131: An asset and liability manager for a large financial institu...
- Question 132: From the bank's point of view, repricing the retail debt por...
- Question 133: James Johnson has a $1 million long position in ThetaGroup w...
- Question 134: Asset and liability management is typically concerned with a...
- Question 135: The technique of using interest rate swap positions to reduc...
- Question 136: Which one of the following four statements does identify cor...
- Question 137: Normally, commercial banking can be viewed as a fixed income...
- Question 138: What is generally true of the relationship between a bond's ...
- Question 139: Which of the following statements defines Value-at-risk (VaR...
- Question 140: Which of the following assets on the bank's balance sheet ha...
- Question 141: In analyzing market option pricing dynamics, a risk manager ...
- Question 142: Changes to which one of the following four factors would typ...
- Question 143: The mark-to-market process includes which one of the followi...
- Question 144: To estimate the price of gold forwards, an investment analys...
- Question 145: The probability of default on a bond is 3%, and in the case ...
- Question 146: Using the definitions used by JPMorgan Chase in their annual...
- Question 147: Which one of the following four statements correctly describ...
- Question 148: Which one of the four following statements about technology ...
- Question 149: Which one of the following four statements on factors affect...
- Question 150: Which one of the following activities is carried out by the ...
- Question 151: Unico Delta stock is trading at $20 per share, its annualize...
- Question 152: An asset manager just bought a coupon paying bond with princ...
- Question 153: The market risk manager of SigmaBank is concerned with the v...
- Question 154: Which one of the following four models is typically used to ...
- Question 155: Mega Bank holds a $250 million mortgage loan portfolio, whic...
- Question 156: US based Alpha Bank holds European corporate bonds and US in...
- Question 157: The exercise for an American type option prior to expiration...
- Question 158: Which of the following statements represents a methodologica...
- Question 159: Which one of the following areas does not typically report i...
- Question 160: BetaFin has decided to use the hybrid RCSA approach because ...
- Question 161: Which one of the following four statements regarding commodi...
