FIN
Topic 6 Financial Disasters.pdf

The breadth of responsibilities and power given to

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the breadth of responsibilities and power given to traders. marked-to-market losses.
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A) B) C) D) Question #5 of 15 Question ID: 438689 A) B) C) D) Question #6 of 15 Question ID: 438682 A) B) C) D) Question #7 of 15 Question ID: 438678 Metallgesellschaft's mismanagement in its long-term fixed contract strategy was evidenced by which of the following? I. Refunding payments to customers who willingly paid to cancel their long-term obligations. II. Canceling the program too soon while the positive legs of the contracts could have been sold at a profit or used to secure additional financing. Neither I nor II. II only. I only. Both I and II. The high degree of operational risk in the Sumitomo case was illustrated by which of the following? I. Model risk. II. High degree of autonomy, allowing the trader to execute highly levered positions. Both I and II. II only. Neither I nor II. I only. Metallgesellschaft could have addressed the cash flow crisis created by their stack-and-roll hedge strategy by: I. Selling puts. II. Requiring periodic cash settlements from customers. I only. II only. Neither I nor II. Both I and II. Banker's Trust used derivative trades, which promised corporate clients a high-probability, small reduction in funding costs in exchange for a low-probability, large loss. Unfortunately, the derivative trades only resulted in significant
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A) B) C) D) Question #8 of 15 Question ID: 438686 A) B) C) D) Question #9 of 15 Question ID: 438688 A) B) C) D) Question #10 of 15 Question ID: 438679 losses for its clients. This case demonstrated the importance of:
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