Which of the Following Scenarios Offer an Example of Wrong

question 28

Multiple Choice

Which of the following scenarios offer an example of wrong way risk?

• A) A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank
• B) A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level
• C) A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels
• D) A bank enters into a receiver's swap while interest rates are increasing

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Definitions:

Inventory

The goods or materials a business holds for the ultimate goal of resale or production.

Aggregate Planner

A tool or process used to determine the optimum levels of production, inventory, and workforce required to meet forecasted demand while minimizing costs.

Basic Strategies

Fundamental approaches or methods applied in planning and decision-making to achieve desired business outcomes or objectives.

Aggregate Planning

A marketing activity aimed at balancing supply and demand by determining the optimal level of production, workforce, inventory, and backorder levels over a medium-term horizon.