Bank Sigma has an opportunity to do a securitization deal for a credit card company, but has to retain a portion
of the residual risk of the deal with an estimated VaR of $8 MM. Its fees for the deal are $2 MM, and the
short-term financing costs are $600,000. What would be the RAROC for this transaction?
A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian
dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for a quote to buy Brazilian reals in
the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer and sells the reals at
this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange
matched transaction. What is the financial impact of this transaction for Alpha bank?
A bank considers issuing new capital to increase its Tier 1 capital levels. Which of the following financial
instruments would most likely to be considered?
Which one of the following statements about futures contracts is correct?
I. Futures contracts are subject to the same risks as the underlying instruments.
II. Futures contracts have additional interest rate risk die to the future delivery date.
III. Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.
A portfolio consists of two floating rate bonds and one fixed rate bond.
Based on the information below, modified duration of this portfolio is
