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Module 2 Chap 5

The document appears to be a quiz on credit risk measurement taken by the user. It consists of 10 multiple choice questions testing understanding of key credit risk concepts like loss given default (LGD), haircuts, and their calculation under various regulatory approaches. The user incorrectly answered most questions.

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Sanjeev Kumar
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Download as DOCX, PDF, TXT or read online on Scribd
14 views

Module 2 Chap 5

The document appears to be a quiz on credit risk measurement taken by the user. It consists of 10 multiple choice questions testing understanding of key credit risk concepts like loss given default (LGD), haircuts, and their calculation under various regulatory approaches. The user incorrectly answered most questions.

Uploaded by

Sanjeev Kumar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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 Dashboard
 My courses
 RSK MGMT
 MODULE II : KEY RISKS AND THEIR MEASUREMENT - CREDIT RISK
 Chapter 5: Quiz

Started on Wednesday, 16 August 2023, 9:06 PM

State Finished

Completed on Wednesday, 16 August 2023, 9:07 PM

Time taken 1 min 21 secs

Question 1
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Question text
LGD determined by rating agencies are based on
Select one:
a. Market prices of defaulted bonds
b. Recovery data of various banks

c. Valuation of assets sold in secondary markets


d. Valuation of assets for defaulted companies
Feedback
The correct answer is: Market prices of defaulted bonds

Question 2
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Question text
LGD is defined with present value of cash losses with respect to
Select one:
a. Exposure at default - Value of collateral
b. Loan amount outstanding

c. Loan amount outstanding - Value of Collateral


d. Exposure at default
Feedback
The correct answer is: Exposure at default

Question 3
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Under the standardized approach, banks estimate LGD from
Select one:
a. Exposure at default

b. Loan amount outstanding


c. Supervisory haircut
d. Value of collateral
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The correct answer is: Supervisory haircut

Question 4
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Question text
In order to determine LGD, the cash losses would have to be discounted at a rate which is
equal to
Select one:
a. Benchmark prime lending rate
b. Repo rate

c. Contractual lending rate


d. Base rate of the bank
Feedback
The correct answer is: Contractual lending rate

Question 5
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Question text
Haircut for a loan under default does not represents potential loss due to
Select one:
a. Volatility in asset price
b. Difference in valuation method

c. Unutilized limits
d. Delays in liquidation
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The correct answer is: Unutilized limits

Question 6
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As per the RBI norm, under FIRB, senior claims on corporate, sovereign and banks not
secured by recognized collateral will be assigned a LGD of
Select one:
a. 50%
b. 75%

c. 30%
d. 65%
Feedback
The correct answer is: 65%

Question 7
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Question text
Which one of the following are not definitions of haircut used for purpose of determining
LGD
Select one:
a. Currency haircut
b. Rating haircut

c. Exposure haircut
d. Collateral haircut
Feedback
The correct answer is: Rating haircut
Question 8
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Question text
Downturn LGD is
Select one:
a. LGD at the worst time of the economic cycle
b. LGD estimates for prevailing market conditions

c. LGD based on defaulted market debt instruments observed after default


d. Average long term LGD corresponding to a cyclical scenario
Feedback
The correct answer is: LGD at the worst time of the economic cycle

Question 9
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Question text
Which one of the following is not true for work out LGD
Select one:
a. Based on recovery rates derived from traded credit sprreads
b. Based on historical default and recovery information

c. Discounted at a rate reflecting borrower's risk


d. Estimated for each type of asset for a bank
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The correct answer is: Based on recovery rates derived from traded credit sprreads
Question 10
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Question text
Under the NCAF Guidelines of RBI, July 1, 2015, the minimum haircut prescribed for
any security (other than cash) is
Select one:
a. 0%
b. 0.50%

c. 2%
d. 1%
Feedback
The correct answer is: 0.50%
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