1.Which of the following is least likely a way to terminate a long position in a deliverable futures contract at expiration?
　　A. An equivalent cash settlement.
　　B. An exchange-for-physicals.
　　C. Close-out at expiration.
　　D. Taking delivery.
　　2.Which of the following is FALSE regarding the use of scorecard data?
　　A. It usually results in higher capital charges than the use of historical data.
　　B. It is forward looking rather than backward looking.
　　C. It is more subjective because it relies upon the judgment of business line managers.
　　D. It more accurately captures the future benefits of risk management activities.
　　3.Seventy-two monthly stock returns for a fund between 1997 and 2002 are regressed against the market return, measured by the Wilshire 5000, and two dummy variables. The fund changed managers on January 2, 2000. Dummy variable one is equal to 1 if the return is from a month between 2000 and 2002. Dummy variable number two is equal to 1 if the return is from the second half of the year. There are 36 observations when dummy variable one equals 0, half of which are when dummy variable two also equals zero. The following are the estimated coefficient values and standard errors of the coefficients.

Coefficient

Value

Standard error

Market

 

1.43000

0.319000

Dummy 1

 

0.00162

0.000675

Dummy 2

 

−0.00132

0.000733

　　What is the p-value for a test of the hypothesis that the beta of the fund is greater than 1?
　　A. Between 0.05 and 0.10.
　　B. Lower than 0.01.
　　C. Between 0.01 and 0.05.
　　D. Greater than 0.10.
　　Answer:
　　1.A
　　A deliverable contract does not permit equivalent cash settlement. Sale of an offsetting contract at the settlement price on the final day of trading (close-out at expiration) will have the same effect, with the cash settlement effectively taking place in the margin account.
　　2.A
　　The use of scorecard data usually results in a lower capital charge than the use of historical loss data.
　　3.A
　　The beta is measured by the coefficient of the market variable. The test is whether the beta is greater than 1, not zero, so the t-statistic is equal to (1.43 ? 1) / 0.319 = 1.348, which is in between the t-values (with 72 ? 3 ? 1 = 68 degrees of freedom) of 1.29 for a p-value of 0.10 and 1.67 for a p-value of 0.05.