Which one of the following four exotic option types has another option as its underlying asset, and as a result
of its construction is generally believed to be very difficult to model?
Which one of the following four relationships should be used to price equity forwards or futures?
A credit portfolio manager analyzes a large retail credit portfolio. Which of the following factors will represent
typical disadvantages of market-linked credit risk drivers?
I. Need to supply a large number of input parameters to the model
II. Slow computation speed due to higher simulation complexity
III. Non-linear nature of the model applicable to a specific type of credit portfolios
IV. Need to estimate a large number of unknown variable and use approximations
The Treasury function of a bank typically manages all of the following components EXCEPT:
Suppose that a regulator deems all corporate debt to have the same risk level. Which of the following behavior
of banks would be an example of regulatory arbitrage?