Risk management quiz

CFA Level III
#1
  1. Are the following statements correct? Discuss with reasons. A. DB plans can use Surplus at Risk (SAR) as a risk measure to indicate whether and how much contribution the sponsor might have to make B. A fully funded plan has a surplus at risk of £9m/year at 5%. I interpret it as a 5% chance of a maximum pension deficit of £9m over the next year C. Bond portfolios X and Y have same market value and durations. They will have similar VaR numbers. 2. Describe the following risk management technique. i. Performance stopout ii. Liquidity limits iii. Risk factor limits iv. working capital allocations v. scenario analysis limits vi. position concentration limits vii. leverage limits
#2

1 all no 2 no time to write

#3

1: A- I THINK IT’S CORRECT B- NO C- NO

#4

1.A - sounds reasonable. B - NO. SAR, like VAR, is not going to determine the maximum loss, just the minimal loss at percentage level C - NO. They could have crazy different key rate durations, one could have an embedded option (contingent claim risk), etc. Equal duration does not equal identical return distribution.

#5

1A I don’t know how to define whether if 1% possiblity surplus has 100 billion minimum loss ,whether we should make contribution? it is subjective