Questions:
Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are well-suited to online simulation.
412.1. Each of the following is true about Long Term Capital Management (LTCM), according to Allen, EXCEPT which is false?
a. LTCM is classified as a disaster due to large market moves rather than a disaster due to misleading reporting
b. LTCM strategy was not to hold any long-term positions; instead, they were "essentially similar to modern-day high-frequency traders"
c. LTCM was bailed out by its creditors who feared the adverse impact to themselves, and their financing clients, of closing out such large positions in such illiquid markets
d. A key lesson from the LTCM incident is that a stress scenario is needed to look at the impact of a competitor holding similar positions exiting the market
412.2. What do these incidents have in common: Chase Manhattan Bank/Drysdale Securities, Kidder Peabody, Barings, Allied Irish Bank, and Union Bank of Switzerland (UBS) in 1997-1998?
a. They are cases in which the firm or its investors and lenders were seriously misled about the size and nature of the positions it had (Disasters due to misleading reporting)
b. They are cases in which the firm and its investors and lenders had reasonable knowledge of its positions, but had losses result from unexpectedly large market moves (Disasters due to large market moves)
c. They are cases in which losses did not result from positions held by the firm, but instead resulted from fiduciary or reputational exposure to positions held by the firm’s customers (Disasters due to the conduct of customer business)
d. None of the above
412.3. Which of the following most accurately reflects a key risk that was realized in the Metallgesellschaft case study?
a. Eventually interest rate spreads are likely to revert to mean
b. Value at risk (VaR) is not necessarily reliable without scenario analysis complements
c. Roll return (roll yield) for a long futures position is negative in contango
d. A firm which does not choose the theoretical minimum variance hedge is economically speculating
Answers here:
Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are well-suited to online simulation.
412.1. Each of the following is true about Long Term Capital Management (LTCM), according to Allen, EXCEPT which is false?
a. LTCM is classified as a disaster due to large market moves rather than a disaster due to misleading reporting
b. LTCM strategy was not to hold any long-term positions; instead, they were "essentially similar to modern-day high-frequency traders"
c. LTCM was bailed out by its creditors who feared the adverse impact to themselves, and their financing clients, of closing out such large positions in such illiquid markets
d. A key lesson from the LTCM incident is that a stress scenario is needed to look at the impact of a competitor holding similar positions exiting the market
412.2. What do these incidents have in common: Chase Manhattan Bank/Drysdale Securities, Kidder Peabody, Barings, Allied Irish Bank, and Union Bank of Switzerland (UBS) in 1997-1998?
a. They are cases in which the firm or its investors and lenders were seriously misled about the size and nature of the positions it had (Disasters due to misleading reporting)
b. They are cases in which the firm and its investors and lenders had reasonable knowledge of its positions, but had losses result from unexpectedly large market moves (Disasters due to large market moves)
c. They are cases in which losses did not result from positions held by the firm, but instead resulted from fiduciary or reputational exposure to positions held by the firm’s customers (Disasters due to the conduct of customer business)
d. None of the above
412.3. Which of the following most accurately reflects a key risk that was realized in the Metallgesellschaft case study?
a. Eventually interest rate spreads are likely to revert to mean
b. Value at risk (VaR) is not necessarily reliable without scenario analysis complements
c. Roll return (roll yield) for a long futures position is negative in contango
d. A firm which does not choose the theoretical minimum variance hedge is economically speculating
Answers here:
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. Appreciate the response! That's helpful.