Financial Risk Management – Quiz 1, 2026 – Study Material
and Practice Questions
Historical Evolution - ANS✔✔ -Short-term interest rate fluctuations
-Exchange rate fluctuations
-Long-term interest rate fluctuations
-The evolution of risk management products
-The global OTC derivatives markets
-The global OTC foreign exchange derivative markets
-The global OTC interest rate derivative markets
-global turnover in OTC derivatives markets
-trading revenues from cash instruments and derivatives
-notional amounts of derivatives of leading banks
Regulatory Environment - ANS✔✔ -Many banks failed to manage "maturity mis-matched"
positions
-Push to implement risk management risk management systems came from the regulators
rather inside banking institutions
-Feds move to require more capital against risky assets
-Regulators attempt to create a level playing field for all banks
-BIS assigned to the job of studying the positions of banks world-wide
-BIS 1998 Accord
-G30 Study on risk management
Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 - ANS✔✔ -
Liberalization of the economic banking environment
-Phasing out of Reg Q
, Garn-St. Germain Depository Institution (DIA) Act of 1982 - ANS✔✔ Allowed banks to offer
money market deposits
The Academic Background and Technological Changes - ANS✔✔ Types of risk: business,
financial, market, liquidity, default, systematic, specific, residual, credit, counterparty,
operations, settlement, country, portfolio, systemic, legal
Markowitz Theory - ANS✔✔
Sharpe/Lintner Theory - ANS✔✔
Black-Scholes/Merton - ANS✔✔
Miller/Modigiliani Theorems - ANS✔✔
Market efficiency - ANS✔✔
Accounting Systems vs Risk Management Systems - ANS✔✔ -Risk affects financial reporting
-Traditional approach is backward looking
---Past performance only was considered
-GARP (generally accepted risk principles) is based on forward looking systems
---Incorporate future profitability
---Incorporate additivity of systematic or beta risk
---Explicitly incorporate the degree of correlation between pairs of securities
and Practice Questions
Historical Evolution - ANS✔✔ -Short-term interest rate fluctuations
-Exchange rate fluctuations
-Long-term interest rate fluctuations
-The evolution of risk management products
-The global OTC derivatives markets
-The global OTC foreign exchange derivative markets
-The global OTC interest rate derivative markets
-global turnover in OTC derivatives markets
-trading revenues from cash instruments and derivatives
-notional amounts of derivatives of leading banks
Regulatory Environment - ANS✔✔ -Many banks failed to manage "maturity mis-matched"
positions
-Push to implement risk management risk management systems came from the regulators
rather inside banking institutions
-Feds move to require more capital against risky assets
-Regulators attempt to create a level playing field for all banks
-BIS assigned to the job of studying the positions of banks world-wide
-BIS 1998 Accord
-G30 Study on risk management
Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 - ANS✔✔ -
Liberalization of the economic banking environment
-Phasing out of Reg Q
, Garn-St. Germain Depository Institution (DIA) Act of 1982 - ANS✔✔ Allowed banks to offer
money market deposits
The Academic Background and Technological Changes - ANS✔✔ Types of risk: business,
financial, market, liquidity, default, systematic, specific, residual, credit, counterparty,
operations, settlement, country, portfolio, systemic, legal
Markowitz Theory - ANS✔✔
Sharpe/Lintner Theory - ANS✔✔
Black-Scholes/Merton - ANS✔✔
Miller/Modigiliani Theorems - ANS✔✔
Market efficiency - ANS✔✔
Accounting Systems vs Risk Management Systems - ANS✔✔ -Risk affects financial reporting
-Traditional approach is backward looking
---Past performance only was considered
-GARP (generally accepted risk principles) is based on forward looking systems
---Incorporate future profitability
---Incorporate additivity of systematic or beta risk
---Explicitly incorporate the degree of correlation between pairs of securities
