FRM Part II (Opertional and Integrated Risk Management)

swarnendu.pathak
Posts: 2
Joined: Thu Apr 09, 2015 8:24 am

FRM Part II (Opertional and Integrated Risk Management)

Postby swarnendu.pathak » Thu Apr 09, 2015 9:20 am

Bank XYZ has a $150 million exposure to ABC Company. The exposure is secured by $125 million of collateral consisting of AA+ rated bonds. ABC Company is unrated. The collateral risk weight is 20%. Bank XYZ assumes an adjustment to the exposure of +15% to allow for possible increase in exposure and allows for a -25% change in the value of collateral. Then the risk weighted assets for the exposure are closest to:
A. $78.75 million
B. $93.75 million
C. $118.13 million
D. 172.50 million

The correct answer mentioned as option A. However I can not understand why the risk weighted for secured portion was not accounted for i.e. $ 93.75*20%. Hence according to me the correct answer should be $ (78.75+93.75*20%) = $97.50 million.
Please explain.

swarnendu.pathak
Posts: 2
Joined: Thu Apr 09, 2015 8:24 am

FRM Part II (Opertional and Integrated Risk Management)

Postby swarnendu.pathak » Fri Apr 10, 2015 8:27 am

Can I have a reply plzzz

edupristine
Finance Junkie
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Joined: Wed Apr 09, 2014 6:28 am

Postby edupristine » Fri Apr 10, 2015 9:35 am

Could you tell me the source of this question?

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

FRM Part II (Opertional and Integrated Risk Management)

Postby edupristine » Wed Apr 15, 2015 6:38 am

This question seems ambiguous. Could you please tell the source of this question?


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