Which of the Following Statements Best Describes the Treatment of Adjusting

question 79

Multiple Choice

Which of the following statements best describes the treatment of adjusting for credit risk of off-balance-sheet activities?

• A)All OBS activities are treated equally in making credit-risk adjustments.
• B)Standby letter of credit guarantees issued by banks to back commercial paper have a 50 percent conversion factor.
• C)The credit or default risk of over-the-counter contracts is approximately zero.
• D)The current exposure component of the credit equivalent amount of OBS derivative contracts reflects the credit risk if the contract counterparty defaults.
• E)The treatment of interest rate forward, option, and swap contracts differs from the treatment of contingent or guarantee contracts.

---

Definitions:

Hagia Sophia

A historic architectural marvel in Istanbul, Turkey, originally built as a Christian cathedral, then converted into a mosque, and now a museum, exemplifying Byzantine architecture.

Procopius

A Byzantine Greek historian of the 6th century, known for his works "The Wars of Justinian", "The Buildings of Justinian", and the scandalous "Secret History".

Vitruvius

An ancient Roman architect and engineer, known for his treatise "De architectura" which outlines the principles of classical architecture.

Vienna Genesis

An illuminated manuscript, essentially a fragment of a 6th-century Greek copy of the Book of Genesis, known for its early Byzantine miniatures.