Bank Risk Management MCQ

Multiple choice question on Bank Risk Management:

1. Risk refers to________

A. The size of the loss

B. Distribution of loss

C. Uncertainty about future results

D. The distribution of income

Answer: C

2. The theoretical basis of risk diversification is_______

A. Portfolio Theory

B. Option Pricing Theory

C. Interest rate parity theory

D. The theory of risk-free arbitrage

Answer: A

3. Compared with market risk and credit risk, the operational risk of commercial banks has_________

A. Uniqueness, non-profitability, and convertibility

B. Universality, non-profitability, and convertibility

C. Particularity, Profitability, and Untransformability

D. Universality, Profitability, and Untransformability

Answer: B

4. The credit business of commercial banks should not be concentrated on borrowers of the same business, the same nature, or even the same country, but should be carried out in many aspects. This is based on the risk management strategy of_______

A. Risk hedging

B. Risk diversification

C. Risk transfer

D. Risk compensation

Answer: B

5. The role of commercial banks’ economic capital allocation is mainly reflected in ( ) two aspects________ 

A. Capital management and liability management

B. Asset management and liability management

C. Risk management and performance appraisal

D. Liquidity management and performance appraisal

Answer: C

6. Commercial banks rely too much on foreign exchange traders who master a lot of technical and key information of commercial banks, which may bring about___________

A. Market risk

B. Liquidity risk

C. credit risk

D. Operational risk

Answer: D

7. For most commercial banks, the most significant credit risk comes from ( ) business.

A. Credit Guarantee

B. a loan

C. Derivatives trading

D. Inter-bank transactions

Answer: B

8. To judge the repayment ability of the borrower, the lender should be directly concerned about the borrower______

A. Future profits

B. Future accounts receivable

C. Future cash flow

D. Ability to continue financing

Answer: C

9. Strategic risk belongs to one type______

A. Long-term potential risks

B. Short-term risk

C. Explicit risk

D. None of the above

Answer: A

10.  __________refers to the fact that business decision-making is wrong, decision-making is improperly implemented, or there is no way to deal with industry changes, which has a realistic and long-term impact on the bank’s income or capital.

A. Liquidity risk

B. Strategic risk

C. Operational risk

D. Legal risk

Answer: B

11. The relationship between risk factors and the complexity of risk management is_____

A. The more risk factors are considered, the easier risk management is

B. The more risk factors, the more complex and difficult the risk management is

C. The number of risk factors is not significantly related to the complexity of risk management

D. The more complex the risk management process is, the more risk factors will be effectively reduced

Answer: B

12. What does the CrCditMCtriCs model think the debtor’s credit risk status is represented by the debtor’s?

A. credit rating

B. Asset size

C. Profitability _

D. Willingness to repay

Answer: A

13. The external rating in the credit rating mainly relies on________

A. Expert qualitative analysis

B. Quantitative analysis

C. Combination of qualitative analysis and quantitative analysis

D. None of the above

Answer: A

14. The formula for calculating the expected loss rate is_______

A. Expected Loss (EL) = Probability of Default (PD) x Loss Given Default (LGD) x Exposure at Default (EAD)

B. Expected loss rate=expected loss/total loan assets*IOO%

C. Expected loss rate = expected loss / total risk assets * 100%

D. Expected loss rate = expected loss / total assets * 100%

Answer: A

15. The credit risk of the loan portfolio includes_______

A. Systemic risk

B. Unsystematic risk

C. There may be both systematic risk and unsystematic risk

D. None of the above is correct

Answer: C

16. The following statement about the correlation coefficient is correct_______

A. The linear correlation coefficient has linear invariance

B. Correlation describes the relationship between two joint events

C. For nonlinear correlation, it can be measured by rank correlation coefficient and Kandel coefficient

D. All of the above are correct

Answer: D

17. The object of the credit transfer matrix model is_______

A. Customer rating

B. Debt rating

C. Both customer ratings and debt ratings

D. I’m wrong

Answer: C

18. The role of asset securitization lies in______

A. Improve the liquidity of commercial bank assets

B. Enhancing the autonomy of commercial banks in asset and liability management

C. is a risk management method of risk transfer

D. All of the above are correct

Answer: D

19. The risk cost in loan pricing is used for________

A. Offset the expected loss of the loan

B. Offset loan unexpected losses

C. Offset the expected and unexpected losses of the loan

D. None of the above

Answer: A

20. The highest risk management and decision-making body of a commercial bank is______

A. Shareholders’ meeting

B. the board of directors

C. Board of Supervisors

D. top management

Answer: B

21. In general, commercial banks usually respond by withdrawing loss reserves and writing off profits_______

A. Expected loss

B. Unexpected loss

C. catastrophic loss

D. economic loss

Answer: A

22. Before the occurrence of various risks, analyze and judge the types of risks and their origins, to evaluate and control the risks. This is____

A. Risk identification

B. Risk measurement

C. Risk monitoring

D. Risk Control

Answer: A

23. The absolute credit spread refers to________

A. The difference between the yields of different bonds or loans

B. The difference between the yield on a bond or loan and the yield on a risk-free bond

C. The difference between the yields of fixed-income securities and equity securities

D. None of the above

Answer: B

24. Credit risk economic capital refers to_________

A. The capital that a commercial bank should hold under a certain confidence level to cope with the unexpected loss of credit risk assets within a certain period in the future

B. The capital that a commercial bank should hold to cope with the expected loss of credit risk assets within a certain period in the future under a certain confidence level

C. Under a certain confidence level, the commercial bank should hold capital to become the unexpected loss and expected loss of credit risk assets within a certain period in the future

D. None of the above

Answer: A

25. The market value of financial assets refers to_______

A. The book value of financial assets based on historical cost

B. On the valuation base date, the expected value of the assets acquired by willing buyers and sellers through arm’s length transactions under the condition of knowledge, prudence and non-coercion

C. The value of assets or bonds acceptable to both parties in an arm’s length transaction

D. The market value obtained by revaluing the trading account positions according to the current market conditions

Answer: B

26. Duration is used to measure the sensitivity of the price of financial instruments to what factors?

A. Interest rate

B. Exchange rate

C. stock index

D. Commodity price index

Answer: A

27. Which of the following businesses includes option risk is____

A. Current deposit business

B. Real estate mortgage loan business

C. Long-term loans with prepayment option clauses

D. Settlement business

Answer: C

28. Which of the following statements about losses caused by financial risks is incorrect_________

A. The possible losses caused by financial risks are divided into expected losses, unexpected losses, and catastrophic losses

B. Commercial banks usually take loss reserves and write off profits to deal with and absorb expected losses

C. Commercial banks usually rely on central bank bailouts to deal with unexpected losses

D. Commercial banks generally need to transfer large-scale catastrophic losses through insurance means

Answer: C

29. The scenario analysis method commonly used in risk identification methods refers to_______

A. List the possible risks one by one and classify them according to different standards

B. Identify and analyze various inappropriate behaviors before the occurrence of risk losses through diagrams, thereby judging and summarizing which mistakes are most likely to lead to risk losses

C. Simulate the possible state of future development of commercial banks through relevant data, curves, charts, etc., identify potential risk factors, predict the scope and results of risks, and select the best risk management plan

D. Risk management personnel find potential risks through actual investigation and research and analysis of financial data such as assets and liabilities, profit and loss statements, and property catalogs of commercial banks

Answer: C

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