Which of the following is true
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.
Which of the following is true of maximum likelihood methods
A. They calculate the maximum possible values for parameters
B. They calculate parameters that give the highest probability of past data occurring
C. They calculate values for key variables that are most likely to occur in the future
D. They involve a multivariate regression analysis
Which of the following is equivalent to a short position in a European put option?
A. A short position in a cash-or-nothing put option plus a long position in an
asset-or-nothing put option
B. A long position in an asset-or-nothing put option plus a long position in a
cash-or-nothing put option
C. A long position in an asset-or-nothing call option plus a long position in a
cash-or-nothing call option
D. A long position in an asset-or-nothing call option plus a short position in a
cash-or-nothing call option
The daily percentage change in an exchange rate is compared to a normal distribution
with the same mean and standard deviation. Which of the following is true
A. Both small and large exchange rate moves are more likely than with the normal
distribution
B. Small exchange rate moves are less likely and large exchange rate moves are more
likely than with the normal distribution
C. Large exchange rate moves are less likely and small exchange rate moves are more
likely than with the normal distribution
D. Both small and large exchange rate moves are less likely than with the normal
distribution
As the convenience yield increases, which of the following is true?
A. The one-year futures price as a percentage of the spot price increases
B. The one-year futures price as a percentage of the spot price decreases
C. The one-year futures price as a percentage of the spot price stays the same
D. Any of the above can happen
Which of the following is true?
A. Hedging can always be done more easily by a company’s shareholders than by the
company itself
B. If all companies in an industry hedge, a company in the industry can sometimes
reduce its risk by choosing not to hedge
C. If all companies in an industry do not hedge, a company in the industry can reduce
its risk by hedging
D. If all companies in an industry do not hedge, a company is liable increase its risk by
hedging
Which of the following describes a covered call?
A. A long call option on a stock plus a long position in the stock
B. A long call option on a stock plus a short put option on the stock
C. A short call option on a stock plus a short position in the stock
D. A short call option on a stock plus a long position in the stock
The process followed by a variable X is
dX = mX dt+sX dz
What is the coefficient of dt in the process for the square of X.
A. 2mX2+2X2
B. 2mX2
C. mX2+22X2
D. mX2+s2X2
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
The 10-day VaR is often assumed to be which of the following
A. The 1-day VaR multiplied by 10
B. The 1-day VaR multiplied by the square root of10
C. The 1-day VaR divided by 10
D. The 1-day VaR divided by the square root of 10
Which of the following is true for a call option on a non-dividend-paying stock when
the stock€s price equals the strike price?
A. It has a delta of 0.5
B. It has a delta less than 0.5
C. It has a delta greater than 0.5
D. Delta can be greater than or less than 0.5
A speculator can choose between buying 100 shares of a stock for $40 per share and
buying 1000 European call options on the stock with a strike price of $45 for $4 per
option. For second alternative to give a better outcome at the option maturity, the stock
price must be above
A. $45
B. $46
C. $55
D. $50
Which of the following is NOTan option open to the party with a short position in the
Treasury bond futures contract?
A. The ability to deliver any of a number of different bonds
B. The wild card play
C. The fact that delivery can be made any time during the delivery month
D. The interest rate used in the calculation of the conversion factor