Gotta love schweser… Which of the following is NOT a damaging consequence of NOT conducting proper stress analysis? A) Inability to proactively alter assumptions about correlation structures. B) Exposure to risk of being taken over. C) Risk of exposure to potential big hits to a portfolio due to second order (gamma) effects of large market moves.
Remember getting double negatives when trying to figure out inventory questions in a deflationary environment at level 1 (or was it II)?
I love these… Which of the following is NOT a damaging consequence of not conducting proper stress analysis? A) Exposure to risk of being taken over. B) Inability to proactively alter assumptions about correlation structures. C) Risk of exposure to potential big hits to a portfolio due to second order (gamma) effects of large market moves.
Answer: Exposure to risk of being taken over. ??
Yep A but Schweser definitely sucks at these.
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B?
Dwight Wrote: ------------------------------------------------------- > Gotta love schweser… > > > Which of the following is NOT a damaging > consequence of NOT conducting proper stress > analysis? > > A) Inability to proactively alter assumptions > about correlation structures. > > B) Exposure to risk of being taken over. > > C) Risk of exposure to potential big hits to a > portfolio due to second order (gamma) effects of > large market moves. Your answer: A was incorrect. The correct answer was C) Exposure to risk of being taken over. Stress analysis makes the risk manager become aware of the consequences of market moves, liquidity crises, and other factors that affect the business of a firm. As a result, the manager can be prepared with proper hedges and advance contingency planning to combat adverse situations. The analysis also highlights the extent of the potential loss so that the manager can decide the extent of exposure to such risk. Risk of being taken over as a target is usually not a concern of this analysis.
Dude, exposure to risk of being taken over is B.
Yeah, when I went back to get the answer it had rearranged the question. Thanks for pointing that out.