Risk Management Quiz

What is the main concept of risk according to the text?

• Expecting a gain from market fluctuations

• Avoiding all financial risks

• Anticipating a loss due to decreasing market prices

• Ensuring a steady income from investments

What is the difference between Expected Loss and Unexpected Loss?

• Expected Loss is easy to predict, while Unexpected Loss is uncertain

• Expected Loss is related to future gains, while Unexpected Loss is related to future losses

• Expected Loss quantifies normal course losses, while Unexpected Loss considers losses outside the normal course

• Expected Loss is always higher than Unexpected Loss

What is the purpose of Risk Management according to the text?

• To increase variability of expected losses

• To eliminate all risks completely

• To take risks without any caution

• To reduce the variability of expected losses and manage unexpected losses

What is the main challenge in Risk Management related to complex derivative instruments?

• Difficulty in identifying the correct risk

• Inability to transfer risk efficiently

• Lack of control over market disruptions

• Difficulty in gauging the level of risk assumed

Which of the following is NOT a class of risk mentioned in the text?

• Economic Risk

• Operational Risk

• Credit Risk

• Market Risk

What does PD stand for in the context of credit risk management?

• Potential Default

• Probability of Default

• Primary Default

• Possible Default

What does LGD measure in credit risk management?

• Leverage Growth Dynamics

• Loss Given Default

• Liquidity Gap Duration

• Loan Guarantee Deposit

What is the purpose of the Liquidity Coverage Ratio (LCR) in banking?

• To ensure sufficient liquidity for short-term needs

• To measure interest rate sensitivity

• To assess market risk exposure

• To promote long-term resilience

What is the Net Stable Funding Ratio (NSFR) designed to address?

• Interest rate sensitivity

• Long-term liquidity mismatches

• Market risk exposure

• Short-term liquidity mismatches

What is the purpose of Duration Gap Analysis (DGA) in financial risk management?

• To evaluate interest rate sensitivity

• To assess market risk

• To manage credit risk

• To measure liquidity risk