442 views

Uploaded by guystuff1234

- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch14.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch09.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch21.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch18.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch26.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch17.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch20.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch25.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch06.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch22.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch15.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch08.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch23.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch19.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch16.doc
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch26.doc
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch21.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch13.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch03.doc
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch11.doc

You are on page 1of 4

Multiple Choice Test Bank: Questions

1. Suppose that the cumulative probability of a company defaulting by years

one, two, three and four are 3%, 6.5%, 10%, and 14.5%, respectively. What

is the probability of default in the fourth year conditional on no earlier

default?

A. 4.5%

B. 5.0%

C. 5.5%

D. 6.0%

2. Which of the following is usually used to define the recovery rate of a bond?

A. The value of the bond immediately after default as a percent of its face

value

B. The value of the bond immediately after default as a percent of the

sum of the bonds face value and accrued interest

C. The amount finally realized by a bondholder as a percent of face value

D. The amount finally realized by a bondholder as a percent of the sum of

the bonds face value and accrued interest

3. Which of the following is true?

A. Risk neutral default probabilities are usually much lower than real

world default probabilities

B. Risk neutral default probabilities are usually much higher than real

world default probabilities

C. Risk neutral and real world probabilities must be close to each other if

there are to be no arbitrage opportunities

D. Risk-neutral default probabilities cannot be calculated from CDS

spreads

4. A hazard rate is 1% per annum. What is the probability of a default during the

first two years?

A. 2.00%

B. 2.02%

C. 1.98%

D. 1.96%

5. Which of the following is true

A. The default probability per year for a company always increases as we

look further ahead

B. The default probability per year for a company always decreases as we

look further ahead

C. Sometimes A is true and sometimes B is true

D. The default probability per year is roughly constant for most

companies

A. Conditional default probabilities are at least as high as unconditional

default probabilities

B. Conditional default probabilities are at least as low as unconditional

default probabilities

C. Conditional default probabilities are sometimes lower and sometimes

higher than unconditional default probabilities.

D. There is no difference between conditional and unconditional default

probabilities because a company can only default once.

7. If a companys five year credit spread is 200 basis points and the recovery

rate in the event of a default is estimated to be 20% what is the average

hazard rate per year over the five years

A. 0.4%

B. 1.2%

C. 1.8%

D. 2.5%

8. Which of the following is true

A. Recovery rates are lower for investment grade companies

B. Recovery rates are higher for non-investment grade companies

C. Recovery rates are negatively correlated with default rates

D. Recovery rates are positively correlated with default rates

9. Which of the following is true

A. The asset swap spread is a measure of excess of the bond yield over

the OIS rate

B. The asset swap spread is a measure of excess of the bond yield over

the LIBOR/swap rate

C. An asset swap exchanges the actual return on the asset for LIBOR plus

a spread

D. None of the above

10.To be investment grade, a company has to have a credit rating of

A. AA or better

B. A or better

C. BBB or better

D. BB or better

11.In the Gaussian copula model which of the following is true

A. The time to default for a company is assumed to be normally

distributed.

B. The time to default for a company is assumed to be lognormally

distributed

C. The time to default for a company is transformed to a normal

distribution

D. The time to default for a company is transformed to a lognormal

distribution

A. Netting always leads to a reduction in a companys exposure to a

counterparty

B. Netting always leads to a companys exposure to a counterparty either

staying the same or going down

C. Netting always increases a companys exposure to a counterparty

D. Netting can increase or reduce the exposure

13.Which of the following is true

A. Downgrade triggers are particularly valuable if they are widely used by

a companys

counterparties

B. Downgrade triggers become less valuable if they are widely used by a

companys counterparties

C.

Downgrade triggers are useless because their impact is always

anticipated by the market

D.

Downgrade triggers are a two-edged sword. If company A has a

downgrade trigger for

company B then company B has a

downgrade trigger for company A

14.Which of the following is true of Mertons model:

A. The equity is a call option on the assets

B. The assets are a call option on the debt

C. The debt is a call option on the equity

D. The equity is a call option on the debt

15.Which of the following is true of Mertons model:

A. The strike price is the market value of the debt

B. The strike price is the market value of the equity

C. The strike price is the book value of the equity

D. The strike price is the face value of the debt

16.Which of the following is true

A. The Gaussian copula model assumes that the defaults of different

companies are independent.

B. The Gaussian copula model assumes that defaults, conditional on the

value of a factor , are independent.

C. The Gaussian copula model assumes that the number of defaults is

normally distributed.

D. None of the above.

17.A derivatives dealer has a single transaction with a company which is a long

position in a five-year option. The Black-Scholes-Merton value of the option is

$6. Suppose that the credit spread on five-year bonds issued by the company

is 100 basis points. What is the dealers CVA per option purchased from the

counterparty?

A. $0.19

B. $1.19

C. $0.29

D. $1.29

18.Which of the following is true

A. A derivative dealers CVA is the counterpartys DVA and vice versa

B. Collateral posted by the counterparty reduces CVA

C. Collateral posted by the dealer reduces DVA

D. All of the above

19.The credit spreads for a counterparty for 5 and 6 years are 2% and 2.2%

respectively. The recovery rate is 60%. What is closest to the unconditional

default probability for the sixth year?

A. 0.04

B. 0.05

C. 0.06

D. 0.07

20.Which of the following is true of Creditmetrics when it is used to calculate

credit VaR

A. Creditmetrics takes defaults but not downgrades into account

B. Creditmetrics takes downgrades but not defaults into account

C. Creditmetrics considers neither defaults nor downgrades

D. Creditmetrics considers both defaults and downgrades

- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch14.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch09.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch21.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch18.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch26.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch17.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch20.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch25.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch06.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch22.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch15.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch08.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch23.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch19.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch16.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch26.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch21.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch13.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch03.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch11.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch07.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch12.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch20.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch10.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch17.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch25.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch05.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch22.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch18.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch24.docUploaded byguystuff1234

- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch13.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch11.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch17.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch20.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch12.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch25.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch22.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch15.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch23.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch19.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch16.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch26.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch03.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch07.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch01.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch04.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch10.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch06.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch05.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch16.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch22.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch02.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch18.docUploaded byguystuff1234
- Hull_OFOD9e_MultipleChoice_Questions_Only_Ch08.docUploaded byguystuff1234

- FINUploaded byAnbang Xiao
- 5 Reasons to Hold Precious Metals Before the Next RecessionUploaded byrichardthebrave
- Opinion - AlcavalaUploaded byEthelbert Ouano
- Euromonitor Presentation.pdfUploaded byRaheel CareerPakistan
- 2016 Predicting Stock Market Returns Using the Shiller CAPEUploaded byjohndennings
- VB6 Commands and FunctionsUploaded byDumdum7
- 29826Uploaded byDeven Agarwal
- Cipm Principles StudysessionsUploaded byGurDeepSiNgh
- Proposa.docxUploaded byDenis Akingbaso
- CPA Government Wide FSUploaded byjklein2588
- Radian Default Claims Servicing GuideUploaded bylostviking
- collegiate cuts business planUploaded byapi-313511794
- FISHERIESUploaded byInsih Sonia Fernandez
- SENATE HEARING, 112TH CONGRESS - HEALTHY FOOD INITIATIVES, LOCAL PRODUCTION AND NUTRITIONUploaded byScribd Government Docs
- Ch17.pptUploaded byzedingel
- 20110812123834-M.B.A.--Semester-System--2011-2012Uploaded byAbhinav Kumar
- Downward and Upward LoadingUploaded byShrinivas Khate
- LNG Industry March 2014Uploaded byAnonymous swWVf3TW5O
- CAPM Proof That Market Portfolio is Value WeightedUploaded byAnastassiya Lyubich
- B1_91_Create_KPIsUploaded byBharathkumar Palanivelu
- Developmental Programmes_IndiaUploaded byABID H
- Republic vs PeraltaUploaded byBarra Queley
- 319603724-Accounting-for-Income-Tax-Questions.docUploaded byzeyyahji
- PAFI - ICMD 2009 (B03)Uploaded byIshidaUryuu
- Capital RationingUploaded bymuhammad farhan
- Sbi - Salary Account - DetailsUploaded bygaurav8tcs
- SynergyUploaded byAhsan
- US Federal Reserve: 200633papUploaded byThe Fed
- leveraged-buyouts-of-private-companiesUploaded byIustina Jureschi
- Permission to Appeal to Upper Tribunal - RedactUploaded byGotnit