Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct?
RAROC is the ratio of:
Which of the following statements about the option gamma is correct? Gamma is the
I. Second derivative of the option value with respect to the volatility.
II. Percentage change in option value per percentage change in the price of the underlying instrument.
III. Second derivative of the value function with respect to the price of the underlying instrument.
IV. Rate of change of the option delta with respect to changes in the underlying price.
James manages a loans portfolio. He has to evaluate a large number of loans to choose which of them he will
keep in the bank's books. Which one of the following four loans would he be most likely to sell to another
bank?
Rising TED spread is typically a sign of increase in what type of risk among large banks?
I. Credit risk
II. Market risk
III. Liquidity risk
IV. Operational risk
