Chapter 4: Operational, Financial, and Strategic Risk

Value-at-risk.

The fund's manager said that on any given day, there is a 5% probability of losing more than 3% of the investment's worth. The statistic quoted by the fund manager is

An additional payment in case the reserves are inadequate.

The market value surplus of an insurer is equal to the fair value of assets minus the present value of liabilities plus the market value margin. The market value margin is

true

A KRI must be leading, rather than lagging, to be effective.. T/f?

On a core capital tier and a supplementary capital tier.

Basel I defined banks' capital based on what?

true

Strategic risks are external to an organization. T/F

Economic capital

The amount of capital a firm needs to remain solvent at a given risk tolerance level.

No trading in the portfolio

Value at risk (VaR) is a method of determining the probability of loss on an investment portfolio over a certain time horizon. The VaR method includes which one of the following assumptions?

Systems

Which one of the following commonly used categories of operational risk includes risks associated with technology and equipment? people or systems?

manufacturer

Which one of the following types of organization would most likely be affected by commodity price risk? manufacturer or retailer?

Regression analysis.

what can be used to measure the relationship between a dependent variable and an independent variable?