Question 1

18.Transactions that do not qualify as hedges must be accounting for as speculation and marked to market each period.

Accepted Answer

A) True 
 B)False  True

Question 2

Risk managers should report to

Accepted Answer

A) the chief trader 
B) legal counsel 
C) the executive in charge of the front office 
D) the executive in charge of the back office 
E) none of the above 
A) the chief trader 
B) legal counsel 
C) the executive in charge of the front office 
D) the executive in charge of the back office 
E) none of the above E

Question 3

In which of the following activities is hedge accounting prohibited?

Accepted Answer

A) hedging an overall portfolio as opposed to an individual transaction 
B) using short calls to protect a long asset 
C) using long puts to protect an asset 
D) hedging a long position with a short futures 
E) hedging a swap with a swaption 
A) hedging an overall portfolio as opposed to an individual transaction 
B) using short calls to protect a long asset 
C) using long puts to protect an asset 
D) hedging a long position with a short futures 
E) hedging a swap with a swaption A

Question 4

Enterprise risk management includes all of the following except

Accepted Answer

A) a process in which a firm seeks to controls all of its risks in a centralized,integrated manner 
B) seeks to manage traditional financial risks,such as interest rate and foreign currency risks 
C) seeks to manage risk of product obsolescence risk 
D) seeks also to manage nontraditional financial risks,such as insurable risks 
E) all of the above 
A) a process in which a firm seeks to controls all of its risks in a centralized,integrated manner 
B) seeks to manage traditional financial risks,such as interest rate and foreign currency risks 
C) seeks to manage risk of product obsolescence risk 
D) seeks also to manage nontraditional financial risks,such as insurable risks 
E) all of the above

Question 5

The purpose of IAS 39 is to prescribe standards for derivatives accounting for foreign currency transactions.

Accepted Answer

A) True 
 B)False

Question 6

By speculating in derivatives,Procter and Gamble used its treasury department as a profit center.

Accepted Answer

A) True 
 B)False

Question 7

Barings lost $1.2 billion because of what?

Accepted Answer

A) a failure of risk controls in one of its foreign offices 
B) model risk in their VAR models 
C) fraudulent transactions 
D) regulators shut it down because of poor risk management 
E) speculating on German interest rates 
A) a failure of risk controls in one of its foreign offices 
B) model risk in their VAR models 
C) fraudulent transactions 
D) regulators shut it down because of poor risk management 
E) speculating on German interest rates

Question 8

Effective risk management requires that the front office clerical operations be separated from the back office trading operations.

Accepted Answer

A) True 
 B)False

Question 9

Derivatives dealers primarily conduct derivatives transactions for which of the following reasons?

Accepted Answer

A) to enhance the returns on their other investment transactions 
B) to profit off of their ability to execute trades at the right time 
C) to profit off of their market making services 
D) to provide services to enhance the overall attractiveness of their product line 
E) 	none of the above 
A) to enhance the returns on their other investment transactions 
B) to profit off of their ability to execute trades at the right time 
C) to profit off of their market making services 
D) to provide services to enhance the overall attractiveness of their product line 
E) 	none of the above

Question 10

A company's auditors are not typically trained to serve in a risk management capacity.

Accepted Answer

A) True 
 B)False

Question 11

Hedge accounting is a method of accounting for which the

Accepted Answer

A) gains and losses from a hedge are deferred until the hedge is completed. 
B) debits and credits are managed to keep the cash account stable 
C) derivatives revenues and expenses are recorded so as to exactly balance 
D) gains and losses on derivatives are shown before the hedge is terminated 
E) none of the above 
A) gains and losses from a hedge are deferred until the hedge is completed. 
B) debits and credits are managed to keep the cash account stable 
C) derivatives revenues and expenses are recorded so as to exactly balance 
D) gains and losses on derivatives are shown before the hedge is terminated 
E) none of the above

Question 12

Barings Bank failed due to excessive government regulation of their derivatives activities.

Accepted Answer

A) True 
 B)False

Question 13

FAS 133 defines effective hedging as

Accepted Answer

A) a hedge with no basis risk 
B) a correctly priced hedge 
C) a perfect hedge 
D) a hedge that reduces 80 to 125 percent of the risk 
E) none of the above 
A) a hedge with no basis risk 
B) a correctly priced hedge 
C) a perfect hedge 
D) a hedge that reduces 80 to 125 percent of the risk 
E) none of the above

Question 14

In a derivatives operations,back office personnel are in charge of front office personnel.

Accepted Answer

A) True 
 B)False

Question 15

End users are all of the following types of organizations except?

Accepted Answer

A) investment funds 
B) non-financial corporations 
C) governments 
D) financial institutions 
E) none of the above 
A) investment funds 
B) non-financial corporations 
C) governments 
D) financial institutions 
E) none of the above

Question 16

A fair value hedge is a transaction designed to protect the market value of an asset held.

Accepted Answer

A) True 
 B)False

Question 17

Cash flow accounting must be used for all hedges involving cash outlays.

Accepted Answer

A) True 
 B)False

Question 18

Hedge accounting is which of the following?

Accepted Answer

A) describing all hedges in footnotes to accounting statements 
B) deferring all recording of hedge profits and losses until the hedge is over 
C) associating the derivative profit or loss with the instrument being hedged 
D) all of the above 
E) none of the above 
A) describing all hedges in footnotes to accounting statements 
B) deferring all recording of hedge profits and losses until the hedge is over 
C) associating the derivative profit or loss with the instrument being hedged 
D) all of the above 
E) none of the above

Question 19

Enterprise risk management is a process in which a firm controls all of its risks in a centralized,integrated manner.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is not true about fair value hedges?

Accepted Answer

A) it requires identification of the effective and ineffective parts 
B) derivatives profits and losses are temporarily carried in an equity account 
C) it requires proper documentation 
D) only dealer firms are eligible to use it 
E) none of the above 
A) it requires identification of the effective and ineffective parts 
B) derivatives profits and losses are temporarily carried in an equity account 
C) it requires proper documentation 
D) only dealer firms are eligible to use it 
E) none of the above

18.Transactions that do not qualify as hedges must be accounting for as speculation and marked to market each period.

Risk managers should report to

In which of the following activities is hedge accounting prohibited?

Enterprise risk management includes all of the following except

The purpose of IAS 39 is to prescribe standards for derivatives accounting for foreign currency transactions.

By speculating in derivatives,Procter and Gamble used its treasury department as a profit center.

Barings lost $1.2 billion because of what?

Effective risk management requires that the front office clerical operations be separated from the back office trading operations.

Derivatives dealers primarily conduct derivatives transactions for which of the following reasons?

A company's auditors are not typically trained to serve in a risk management capacity.

Hedge accounting is a method of accounting for which the

Barings Bank failed due to excessive government regulation of their derivatives activities.

FAS 133 defines effective hedging as

In a derivatives operations,back office personnel are in charge of front office personnel.

End users are all of the following types of organizations except?

A fair value hedge is a transaction designed to protect the market value of an asset held.

Cash flow accounting must be used for all hedges involving cash outlays.

Hedge accounting is which of the following?

Enterprise risk management is a process in which a firm controls all of its risks in a centralized,integrated manner.

Which of the following statements is not true about fair value hedges?

Introduction

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: the Binomial Model

Option Pricing Models: the Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

Principles of Pricing Forwards,futures and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging,spread,and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Appplications

Filters

Exam 15: Managing Risk in an Organization

18.Transactions that do not qualify as hedges must be accounting for as speculation and marked to market each period.

Risk managers should report to

In which of the following activities is hedge accounting prohibited?

Enterprise risk management includes all of the following except

The purpose of IAS 39 is to prescribe standards for derivatives accounting for foreign currency transactions.

By speculating in derivatives,Procter and Gamble used its treasury department as a profit center.

Barings lost $1.2 billion because of what?

Effective risk management requires that the front office clerical operations be separated from the back office trading operations.

Derivatives dealers primarily conduct derivatives transactions for which of the following reasons?

A company's auditors are not typically trained to serve in a risk management capacity.

Hedge accounting is a method of accounting for which the

Barings Bank failed due to excessive government regulation of their derivatives activities.

FAS 133 defines effective hedging as

In a derivatives operations,back office personnel are in charge of front office personnel.

End users are all of the following types of organizations except?

A fair value hedge is a transaction designed to protect the market value of an asset held.

Cash flow accounting must be used for all hedges involving cash outlays.

Hedge accounting is which of the following?

Enterprise risk management is a process in which a firm controls all of its risks in a centralized,integrated manner.

Which of the following statements is not true about fair value hedges?

Introduction

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: the Binomial Model

Option Pricing Models: the Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

Principles of Pricing Forwards,futures and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging,spread,and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Appplications

Filters