Gamma Bank is active in loan underwriting and securitization business, and given its collective credit
exposure, it will be typically most interested in the following types of portfolio credit risk:
I. Expected loss
II. Duration
III. Unexpected loss
IV. Factor sensitivities
To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a
credit portfolio manager should use the following metric:
A large multinational bank is concerned that their duration measures may not be accurate since the yield curve
shifts are not parallel. Which of the following statements would be typically observed regarding variability of
interest rates?
Why do regulatory standards impose formulaic capital calculations for all of the banks activities?
I. If the banks use different models it is difficult for a regulator to compare results across banks.
II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in
their calculations.
III. By imposing standardized calculations regulators can make sure that banks do not use capital calculations
to game the banking regulation system.
Which one of the following four statements correctly defines a typical carry trade?
