How Can Market Risk Be Defined in Absolute Terms

question 57

Multiple Choice

How can market risk be defined in absolute terms?

• A)A dollar exposure amount or as a relative amount against some benchmark.
• B)The gap between promised cash flows from loans and securities and realized cash flows.
• C)The change in value of an FI's assets and liabilities denominated in nondomestic currencies.
• D)The cost incurred by an FI when its technological investments do not produce anticipated cost savings.
• E)The capital required to offset a sudden decline in the value of its assets.

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Definitions:

Content Validity

The extent to which a test measures all aspects of the concept or construct it intends to assess.

Reliability

The degree to which an assessment tool produces stable and consistent results over multiple administrations.

Heritability

A measure of how much of the variation in a trait among individuals within a population is due to genetic factors.

Factor Analysis

A statistical approach for expressing the differences among observed, interrelated variables by means of fewer, not directly observed variables, referred to as factors.