purnima devi

Which of the following best defines credit risk?

• Risk of a decline in the value of securities.

• Risk of loss due to a borrower’s failure to repay a loan.

• Risk of changes in interest rates affecting the market.

• Risk of operational failures within a company.

What is the primary purpose of credit risk management?

• To maximize investment returns.

• To minimize the risk of default and losses.

• To ensure compliance with regulatory requirements.

• To manage liquidity within the firm.

Which of the following tools is commonly used for credit risk assessment?

• Duration analysis.

• Value at Risk (VaR).

• Credit scoring models.

• Scenario analysis.

Which of the following is NOT a common method for mitigating credit risk?

• Diversification.

• Credit derivatives.

• Centralized lending.

• Collateral.

Which regulatory framework is specifically designed to address credit risk in banks?

• Basel III.

• Dodd-Frank Act.

• Sarbanes-Oxley Act.

• GDPR.

What does the term "default probability" refer to in credit risk management?

• The likelihood that interest rates will increase.

• The chance that a borrower will fail to meet debt obligations.

• The potential loss due to market value fluctuations

• The probability of operational failures.

Which of the following is a qualitative method for assessing credit risk?

  

  

• Credit scoring.

• Credit ratings.

• Financial statement analysis.

• Peer group analysis.

In credit risk management, what is the significance of the "recovery rate"?

  

• The interest rate charged on a loan.

• The percentage of a loan that is expected to be recovered in the event of default

• The rate at which credit is extended to new borrowers.

• The frequency of loan repayments.

What is a Credit Default Swap (CDS)?

  

• A security that pays fixed interest.

• A derivative used to transfer credit risk.

• A type of corporate bond.

• A loan guarantee program.

What role does a credit rating agency play in credit risk management?

   

• It provides investment advice.

• It rates the creditworthiness of borrowers.

• It offers insurance against defaults.

• It manages loan portfolios for banks.