Risk

Which of the following is not considered to be a type of credit risk? I. default risk. II. credit spread risk. III. downgrade risk. A. I. B. II. C. III. D. None of them.

D

Isn’t Default risk a type of credit risk?

You are right chad, it is a type of credit risk. The question is asking which is NOT a type of credit risk.

My God, I think I need to go over a Grammar book rather than the CFAI/Schweser books.

No worries chad, I can tell from your posts and replies that you are in good shape for this test. Hey are you in Dubai?

Yeah man, grew up in Dubai, but I’m studying in California right now and will be taking the exam in San Francisco. What about you mate?

I’m from Canada, but I visited Dubai four years ago (among other places in the Middle East). When I was there, they were in the middle of building the Palm. I can’t imagine what’s all there now. Do you think you will move back after you are done? What are you studying?

I was in Canada (Toronto) last December! Loved it there. The Palm’s done, if you search for this video on YouTube titled “Atlantis Palm Dubai Opening” you’ll see what it looks like now. Atlantis is a resort on the Palm Island and it had a GRAND opening recently. Pretty spectacular. I have two job offers here in Cali but I might go back to Dubai. Studying Finance and I graduate in December. What’s your story man?

Sounds fantastic, I’m jealous of the nice weather down there. It’s too cold here :wink: I’ll have to visit Dubai soon. As for myself, I’m born and raised in Calgary. My father ended up coming here since he’s in the oil business. I have a chemical engineering degree but I currently work as a petroleum engineer for a large oil and gas firm. A couple of a years ago I was managing oil and gas rigs and service operations out of a little town in northern Alberta, now I’m studying for a standardized test because I find this finance stuff (especially value investing) really interesting. Go figure :wink:

Hey Ali, how do you like the oil/gas business in calgary? Are you looking for finance work in the same area? Does your company have it’s own trading department? About the question, isn’t credit spread risk = risk spreads between risk-free and risky bonds increases? That’s more of an economic risk isn’t it? Not really related to the credit risk of the issuer. I’d choose B…

just looked it up , Volume 5 of CFAI test pg 277. They are all examples of credit risk

Isura, the oil and gas business is good, but it’s a little iffy now. It’s really tough to gauge how busy it will be in the next year with high service costs and low commodity prices. The costs have truly been “downward sticky” ;). I wouldn’t mind looking for a finance related job eventually. I’m thinking something along the lines as an equity analyst for one of the banks as I’d have experience working for a producer in different technical roles (including acquisitions, which the engineers do at my job). My company doesn’t actively trade commodities. They sort of just engage in collars and buy puts to hedge some of our oil and gas production and that’s it. Some of the others (BP, Nexen) have large trading departments but if you go through their annual reports, you will see a lot of quarters they are hit and miss with profitability from that division.