BÀI TẬP 2

1. [27.6: FRM EXAM 2008] Your bank calculates a one-day 95% VAR for market risk, a one-year 99% VAR
for operational risk, and a one-year 99% VAR for credit risk. The measures are $100 million, $500 million,
and $1 billion, respectively. Operational risk is defined to include all risks that are not market risks and
credit risks, and these three categories are mutually uncorrelated. The market risk VAR assumes
normally distributed returns, and the bank expects to be successful to keep its market risk VAR at that
level for the whole year. Your boss wants your best estimate of a firm wide VAR at the 1% level. Among
the following choices, your best estimate is:

a. $1.7 billion

b. $1.94 billion

c. $2.50 billion

d. It is impossible to aggregate risks with different distributions having only this information.

2. [27.14: FRM EXAM 2006—QUESTION 3] A risk manager for ABC Bank has compiled the following data
regarding a bond trader and an equity trader. Assume that the returns are normally distributed and that
there are 52 trading weeks per year. ABC Bank computes its capital using a 99% VAR. Dollar amounts are
in millions.

Calculate the risk-adjusted performance measure (RAPM) for the bond trader.

a. 25.24%

b. 36.08%

c. 60.15%

d. 84.92%

3. [27.16: FRM EXAM 2007—QUESTION 124] The bank you work for has a RAROC model. The RAROC
model, computed for each specific activity, measures the ratio of the expected yearly net income to the
yearly VAR risk estimate. You are asked to estimate the RAROC of its $500 million loan business. The
average interest rate is 10%. All loans have the same probability of default of 2% with a loss given
default of 50%. Operating costs are $10 million. The funding cost of the business is $30 million. RAROC is
estimated using a credit VAR for loan businesses, in this case 7.5%. The economic capital is invested and
earns 6%. The RAROC is:
a. 19.33%

b. 46.00%

c. 32.67%

d. 13.33%

4 [13.6: FRM EXAM 2007—QUESTION 125] A firm is going to buy 10,000 barrels of West Texas
Intermediate Crude Oil. It plans to hedge the purchase using the Brent Crude Oil futures contract. The
correlation between the spot and futures prices is 0.72. The volatility of the spot price is 0.35 per year.
The volatility of the Brent Crude Oil futures price is 0.27 per year. What is the hedge ratio for the firm?

a. 0.9333

b. 0.5554

c. 0.8198

d. 1.2099

5. [13.7: FRM EXAM 2009—QUESTION 3-26] XYZ Co. is a gold producer and will sell 10,000 ounces of
gold in three months at the prevailing market price at that time.The standard deviation of the change in
the price of gold over a three-month period is 3.6%. In order to hedge its price exposure, XYZ Co.
decides to use gold futures to hedge. The contract size of each gold futures contract is 10 ounces. The
standard deviation of the gold futures price is 4.2%.The correlation between quarterly changes in the
futures price and the spot price of gold is 0.86. To hedge its price exposure, how many futures contracts
should XYZ Co. go long or short?

a. Short 632 contracts

b. Short 737 contracts

c. Long 632 contracts

d. Long 737 contracts

6. [13.9: HEDGING] If all spot interest rates are increased by one basis point, avalue of aportfolio of
swaps will increase by $1,100. How many Eurodollar futures contracts are needed to hedge the
portfolio?

a. 44

b. 22

c. 11

d. 1,100