PRMIA 8004 Quiz 1 Topic 1 Questions 1-5

Question: 1

The hedging strategy employed by MG Refining & Marketing has been called:

ADynamic hedging

BA stacked hedge

CA differential hedge

DNothing because MG Refining & Marketing did not hedge its position

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Question: 2

According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?

Aselling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Bselling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Cselling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Dselling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

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Question: 3

Taisei Fire and Marine Insurance Co

Arelied almost entirely on Fortress Re's management team for information on the risks in its portfolio

Brelied on the information it received from other members of the reinsurance pool to manage its risks

Chad a full understanding from Fortress Re of the risks in the pool

Dhad a full understanding from other members of the pool of the pool's liabilities

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Question: 4

Barings failed to recognize that Nick Leeson's losses were increasing because:

ALeeson ran the front office

BThe London office did not ask for any reports

CLeeson hid his trades in a suspense account

DThe margin report sent to London did not show the true margin needs

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Question: 5

The financial intermediary services provided by Fannie Mae and Freddie Mac were designed to

AOffer loans directly to the consumer

BCompete directly with banks in selling mortgaged to would-be home owners

CRepackage mortgage loans made by banks and sell them on to investors as asset backed securities

DBuy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow

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PRMIA 8004 Quiz:1 Topic:1 Questions:1-5