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chap023 - Chapter 023 Risk Management An Introduction to...

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Chapter 023 Risk Management: An Introduction to Financial Engineering Multiple Choice Questions 1. The process of lowering a firm's exposure to rate or price fluctuations is called: a. abating. b. deriving. C . hedging. d. forwarding. e. manipulating. SECTION: 23.1 TOPIC: HEDGING TYPE: DEFINITIONS 2. A financial asset that represents a claim to another financial asset is called a(n): SECTION: 23.1 TOPIC: DERIVATIVE SECURITY TYPE: DEFINITIONS 3. A plot showing how the value of a firm is affected by changes in prices or rates is called a(n): SECTION: 23.2 TOPIC: RISK PROFILE TYPE: DEFINITIONS 23-1
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Chapter 023 Risk Management: An Introduction to Financial Engineering 4. Short-run financial risk arising from the need to buy or sell at uncertain prices or rates in the near future is called: SECTION: 23.2 TOPIC: TRANSACTIONS EXPOSURE TYPE: DEFINITIONS 5. Long-term financial risk arising from permanent changes in prices or other economic fundamentals is called: a. forward risk. b. volatility exposure. C . economic exposure. d. transactions exposure. e. translation risk. SECTION: 23.2 TOPIC: ECONOMIC EXPOSURE TYPE: DEFINITIONS 6. A(n) _____ contract is a legally binding agreement between two parties calling for the sale of an asset or product in the future at a price agreed upon today. A . forward b. spot c. swap d. exchange e. floating SECTION: 23.3 TOPIC: FORWARD CONTRACT TYPE: DEFINITIONS 23-2
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Chapter 023 Risk Management: An Introduction to Financial Engineering 7. A plot showing the gains and losses that will occur on a contract as the result of unexpected price changes is called a: SECTION: 23.3 TOPIC: PAYOFF PROFILE TYPE: DEFINITIONS 8. A forward contract with a marking to market feature is called a(n) _____ contract. SECTION: 23.4 TOPIC: FUTURES CONTRACT TYPE: DEFINITIONS 9. Hedging an asset with contracts written on a closely related, but not identical, asset is called: SECTION: 23.4 TOPIC: CROSS-HEDGING TYPE: DEFINITIONS 23-3
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Chapter 023 Risk Management: An Introduction to Financial Engineering
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