Learning Module 6 Introduction to Risk Management

Which of the following most completely captures the three distinct ways the term 'risk' is used in risk management?

A board states the organization can tolerate a 10% shortfall in annual revenue but not a 25% shortfall. This statement is best described as:

Which of the following best explains why an enterprise view of risk management matters for a corporate pension fund?

Which component is not normally listed as part of a risk management framework in the chapter?

Risk budgeting most directly helps a firm do which of the following?

Which of these is primarily a market risk rather than a credit or liquidity risk?

Which is the best description of liquidity risk as used in the chapter?

Which risk is defined as the organization running out of cash even if its assets might be solvent in value terms?

Which metric answers the question: 'What is the minimum loss we expect with 5 percent probability over a one-day horizon'?

Which pair are first-order and second-order derivative sensitivities respectively?

Which of the following statements about VaR is correct?

Which tool is described as complementary to VaR for evaluating extreme scenarios?

Which of the following best describes 'wrong-way risk'?

Which mitigation method is described as pooling many relatively uncorrelated risks and charging premiums based on expected aggregate losses?

A company hedges a future foreign-currency receivable by entering a forward contract to sell that currency in one year. Compared with buying an option to sell, a forward:

Which of these is an example of operational risk as defined in the chapter?

Which best describes 'tail risk' concerns raised in the chapter?

Why is diversification often characterized as a form of self-insurance?

Which of the following is a practical reason insurers include deductibles in policies, according to the chapter?

An investment fund decides to limit its total portfolio beta to no more than 0.7. This is an example of:

Which of the following best explains why operational risk events are hard to measure quantitatively?

When two risks interact nonlinearly (e.g., leverage combined with liquidity stress), the resulting total loss is often:

Which of the following is a correct example of settlement risk?

A CRO (Chief Risk Officer) is most appropriately tasked with which of the following?

Which of these is least likely to be a reason a board delays discussing risk tolerance until after a crisis, per the chapter?

Which statement best describes the role of communication in risk management?

If a firm decides to hold more cash to reduce solvency risk, this action is best classified as:

Which of the following is an example of risk shifting rather than risk transfer?

An investment committee wants to ensure the portfolio manager is adding value relative to passive market exposure. Which risk governance tool directly facilitates comparing active decisions against market risk-return?

Which of the following is a correct implication of the chapter's discussion on individuals' 'enterprise' of total wealth?

Which of the following best describes 'model risk' as used in the chapter?

A firm faces a rare but extreme potential loss from a natural catastrophe. Which mitigation approach would the chapter most likely recommend considering first?

Which of the following describes the primary benefit of performing scenario analysis regularly?

Which of the following is the most accurate characterization of 'enterprise risk management' in the chapter?

Which factor makes credit risk measurement particularly challenging, as described in the chapter?

Which of the following is an argument the chapter gives for having a CRO or risk committee?

Which of the following best describes a 'surety bond' in corporate risk management terms?

A hedge fund reduces turnover and holds losing positions longer in hopes of a rebound while selling winners quickly. Which bias would a risk governance process aim to mitigate in its investment review?

Which of the following is a correct use of the Greeks for risk management?

An organization wants to ensure its risk exposures remain 'in line' with policies. Which step in the risk framework addresses monitoring and action when exposures deviate?

Which of the following best explains why risks that are 'insurable' are attractive to insurers?

Which example from the chapter illustrates how leverage can interact with liquidity to create amplified loss?

Which of the following is NOT listed as a core component of risk infrastructure?

Which of the following correctly pairs a mitigation technique with its typical downside as described in the chapter?

Which of the following best summarizes why regulatory, accounting, and tax changes are challenging risks to quantify?

Which of the following is a reason a firm would use reinsurance or catastrophe bonds?

Which of the following is a correct application of extreme value theory mentioned in the chapter?

If an organization sets a risk budget by factor exposures (equity beta 60%, interest-rate sensitivity 30%, FX 10%), this approach is an example of:

Which of the following statements aligns with the chapter's view on the ultimate goal of risk management?

Which practice would the chapter most strongly recommend to detect hindsight bias in investment review?