15. Question 15-16 test your knowledge about Basel. Netting refers to a clause in the ISDA...

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15. Question 15-16 test your knowledge about Basel. Netting refers to a clause in the ISDA master agreement, which states that all the trans- actions are considered as a single transaction in the event of a default. Which version of Basel is the first time that Netting put forward. (A) Basel I (B) Basel I Amendment (C) Basel II (D) Basel III 16. Continuing with problem 15, the committee put forward the Net Replace- ment Ratio (RNN) when netting is put forward. The formula is: NRR = Exposure with netting Exposure without netting Where, V₁ stands for the exposure of each single trade. Here listed 4 related trades: (A) 1.00 (B) 0.52 (C) 0.29 (D) 0.20 maz(Σ!, V, 0) N i=1 max(Vi, 0) • 3-year interest rate swap: Exposure = -60 • 6-year foreign exchange forward: Exposure = 70 . 9-month stock option: Exposure = 55 9-month swaptions of 1-year Libor rate: Exposure What is the value of NRR? = -40 15. Question 15-16 test your knowledge about Basel. Netting refers to a clause in the ISDA master agreement, which states that all the trans- actions are considered as a single transaction in the event of a default. Which version of Basel is the first time that Netting put forward. (A) Basel I (B) Basel I Amendment (C) Basel II (D) Basel III 16. Continuing with problem 15, the committee put forward the Net Replace- ment Ratio (RNN) when netting is put forward. The formula is: NRR = Exposure with netting Exposure without netting Where, V₁ stands for the exposure of each single trade. Here listed 4 related trades: (A) 1.00 (B) 0.52 (C) 0.29 (D) 0.20 maz(Σ!, V, 0) N i=1 max(Vi, 0) • 3-year interest rate swap: Exposure = -60 • 6-year foreign exchange forward: Exposure = 70 . 9-month stock option: Exposure = 55 9-month swaptions of 1-year Libor rate: Exposure What is the value of NRR? = -40

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The detailed answer for the above question is provided below 15 The correct answer is C Basel II Bas... View the full answer