FRM一级
1.Adding a stock to a portfolio will reduce the risk of the portfolio if the correlation coefficient is less than which of the following?
A. +0.50.
B. +1.00.
C. +0.30.
D. 0.00.
2.Which statement best describes the return to loans after ratings change?
A. Loan returns are asymmetric since the lender only partially absorbs the downside losses.
B. Loan returns are symmetric as the lender absorbs all the downside losses and absorb the upside.
C. Loan returns are symmetric as the lender enjoys upside benefits.
D. Loan returns are asymmetric as the lender absorbs all the downside losses and none of the upside.
3.Of the Sharpe, Treynor, and Jensen’s Alpha measures, when measuring the risk/return performance of actively managed portfolios, which is the most appropriate to use?
A. Treynor measure.
B. Sharpe ratio.
C. Jensen's Alpha.
D. All three measures are equally appropriate.
FRM二级
4.From the swap seller's perspective, a default swap creates a:
A. Short position in the reference obligation.
B. Long position in the reference obligation.
C. Call position in the reference obligation.
D. Put position in the reference obligation.
5.The AT&T pension fund reports total assets worth $19.6 billion and liabilities of $17.4 billion. Assume the surplus has a normal distribution and volatility of l0% per annum. The 95% surplus at risk over the next year is
A. $360 mil1ion
B. $513 million
C. $2,860 million
D. $3,220 million
6.An investor can gain the exposure and return of an underlying loan by:
A. Being the credit risk buyer in a total return swap.
B. Being the credit risk seller in a total retum swap.
C. Entering into an interest-rate swap with a BB credit.
D. Pledging compensating balances with the lender bank.
Answer:
1.B
Adding any stock that is not perfectly correlated with the portfolio (+1) will reduce the risk of the portfolio.
2.D
Lenders absorb all losses in default but receive no upside if the borrower improves in credit quality.
3.C
Jensen’s Alpha measures the value added of an active portfolio strategy.
4.B
From the swap seller's perspective, a default swap creates a long position in the reference obligation. If the reference obligation increases in value or credit quality, the default swap decreases in value below the price at which it was originally sold.
5.A
The fund's surplus is the excess of assets over liabilities, which is $19.6 - $17.4 =$2.2 billion. The surplus at risk at the 95% level over one year is, assuming a norrnal distribution, 1.645 10% $2,200 = $360 million. Answer B) is incorrect b ecause it uses a 99% confidence level. Answers C) and D) are incorrect because they apply the risk to the liabilities and assets instead of the surplus.
6.A
The credit-risk seller pays to the credit-risk buyer the total return of the underlying instrument. An investor can gain the exposure and return by being the buyer in a total return swap.
