Risk Seminar for Access Campus – Final Test Questions

Questions

What are the 5 high level components of a Risk Management Framework? Please select from the choices below (3 points)

  • 1. Risk Appetite / Risk Strategy
  • 2. Risk Conversion
  • 3. Risk Positioning
  • 4. Risk Review
  • 5. Risk Process

What should be done first, before a decision is taken about hedging FX or IR Risk. As which of the 4 general options to manage risks would hedging be classified? (3 p.)

Please select “true” or „false“ for the following statements: (13 p.)

  • Institutions can only have FX Risk if they take liabilities and / or generate assets in foreign currency
  • Institutions can only have Interest Rate Risk if they operate with flexible rates. If they apply fixed rates only, there is no such risk
  • Market Risk can be positive or negative, and all MFIs should use the upside potential to generate additional income.
  • The OCP (Open Currency Position) is a sufficient measure to quantify FX Risk

Match the 2 types of counterparty risks with their correct description (2 p.)

  • a. The risk of loss due to cost of replacing an outstanding transaction
    Principle risk
  • b. The risk of loss caused by replacing a counterparty on the list of approved counterparties
    Replacement risk
  • c. The risk of the loss of the principle amount of a loan given to a client
    Principle risk
  • d. The risk of loss of the principal placed with a financial counterparty
    Principle risk

Assume you have a short OCP, which you want to hedge with an Option. What kind of contract will you buy? (2 p.)

  • A call in this currency
  • A put in this currency