ACI
3I0-012 · Question #54
Which of the following scenarios offer an example of wrong way risk?
The correct answer is A. A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a. See the full explanation below for the reasoning.
Question
Which of the following scenarios offer an example of wrong way risk?
Options
- AA bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a
- BA bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index
- CA bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility
- DA bank enters into a receiver's swap while interest rates are increasing
How the community answered
(42 responses)- A74% (31)
- B7% (3)
- C2% (1)
- D17% (7)
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