**Market Risk:**

1. Lognormal VAR calculation - given annual volatility, compute daily VAR

2. 95% ES

3. 98% ES of 252 trading days

4. Mean reversion, long-run mean rate -> **Answer = 0.26/0.72 = 0.36**

5. Ho-Lee model computation - two period down -> **Answer = apply formula, use square root for the volatility**

6. Vasicek model computation -> **Answer excluded the second term, i.e. dw = 0 (it was 2.08% or 4.08% or something to that effect)**

7. News of merger complete or fail – shape of implied volatility -> **Answer = volatility frown**

8. Implied volatility of equity options (i.e. smirk) -> **Answer = at the money call and deep out of the money call**

9. Weighted historical simulation approaches - age, corr, vol, filtered -> **Answer = filtered**

10. Regresssion hedge - obtain beta value from the table -> **Answer incorporated the beta provided, then direct application of the formula**

11. Duration / Cash flow / Principal mapping -> **Answer = Cash Flow VAR < Duration VAR (incorrect?)**

12. Historical Simulation vs Bootstrapping - normal/non-normal

13. **Answer = "ES at least VAR"**

14. Model backtesting question at 99%** -> Answer = Reject model**

15. Mapping, where one of the answer was mapping long term to 6-months ->** Answer = ?????**

**Credit Risk:**

1. Stressed loss -> **Answer = (stressed pd – non-stressed pd) * EE * LGD (incorrect?)**

2. CreditRisk+, KMV, CreditMetrics -> **Answer = CreditMetrics (incorrect?)**

3. Given loan equivalency ratio, compute the Exposure at Default ->** Answer = Apply formula, use LEQ on the undrawn portion**

4. TRS swap - bank enters into a swap as the TRS payer to hedge counterparty risk -> **Answer = When default, bank receives Par minus mkt value (incorrect?)**

5. Distressed company, high volatility - impact on the value of senior debt / subordinated debt

6. Collateral – threshold, remargin period etc -> **Answer = high threshold (incorrect?)**

7. Securitization of auto loan pool, where auto loan pool has higher rating than the bank's balance sheet -> **Answer = funding benefit (incorrect?)**

8. Credit VAR at 95%, 6 defaults from binomial model -> **Answer = 6*2 - 2*68*0.04 = 6.56mil**

9. Risk neutral / real world default probabilities ->** Answer = higher CVA when using risk neutral default probabilities (incorrect?)**

10. Number of defaults given a table showing the number of surviving companies

11. Hazard rate of 0.12, probability of survival in Y1 and death in Y2 -> **Answer = (1 - e^-0.12(2)) - (1 - e^-0.12) = 10.0%**

12. Group of 10 (G10) meeting following the financial crisis - what changed?

13. Can't recall but one question provided a credit spread of 450 basis point annually

**Operational Risk:**

1. AML - Correspondent Banking

2. Compute RAROC -> **Answer = direct application of formula, ignoring the figure provided for Unexpected Loss completely**

3. Loss due to floods - which is an operational risk loss?

4. New CDO, assesses data quality, which is the biggest issue? -> **Answer = different business units have different formats of risk data (option D)**

5. Threshold of 75 million, losses that exceed the threshold – GEV / generalized pareto -> **Answer = generalized pareto dist for loss severity (incorrect?)**

6. Calculate endegenous liquidity -> **Answer = 1.08 bil**

7. Specials spreads, i.e. is specials rate above/below GC rate, and the nature of the spread before/after auction -> **Answer = ????**

8. Bank has identified the Business Indicator, what's next? **Answer -> internal loss data for the internal loss multiplier**

9. Answer = "4 exceptions is within green zone"

10. Outsourcing risk for IT ->** Answer = outsourced party must receive same attention as if it is done in-house**

11. Many operational errors, what must be done? -> **Answer = maker-checker controls (option D)**

12. **Answer = "declaring cash dividend will reduce Tier 1 capital"**

13. **Answer = "increase in operational risk capital charge" (Question was on swap transaction, the bank gained, so there would have been increase in gross profits)**

14. LTCM -> **Answer = VAR horizon (incorrect?)**

** A possible question on Risk Appetite Framework - let me know if there was such a question

** A possible question on Adjusted RAROC - let me know if there was such a question

**Investment Risk:**

1. Fama French 3 factor model -> **Answer = small minus big**

2. Portfolio construction techniques -> **Answer = quadratic programming**

3. Hedge fund -> **Answer = merger arbitrage and large downside tail risk like equities**

4. Hedge fund ->** Answer = profit from dedicated short bias strategy**

5. Hedge fund, on the changes following institutional investors joined

6. Risk budgeting, 80mil US equities portfolio -> **Answer = Add 50 mil of US bonds to portfolio**

7. Define Incremental / Marginal / Component VAR

8. Maximize sharpe ratio -> **Answer = Option A, increase allocation to the stock with the highest excess return and lowest volatility, going by ratio of excess return to volatility (incorrect?)**

9. On selecting the manager with the best performance, options were alpha, mogdiliani etc -> **Answer = alpha (incorrect?)**

** A possible question on Portfolio VAR - let me know if there was such a question

**Current Issues:**

1. SOFR rate derived from? -> **Answer = Large banks (incorrect?)**

2. **Answer = "Clustering, to detect fraud"**

3. Central counterparty -> **Answer = initial/variation margin introduces liquidity risk**

4. Cyber risk -> **Answer = sharing information with law enforcement, supervisors, regulators and private sector**

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