Which of the following is an adequate definition of the term general market risk charge?
A) A charge reflecting the risk of the decline in the liquidity of the trading portfolio.
B) A charge reflecting the modified duration and interest rate shocks for each maturity.
C) A charge reflecting the risk of the decline in the credit risk quality of the trading portfolio.
D) A charge reflecting the duration and interest rate gaps for each maturity.

Question

Quizplus · Accepted Answer

General market risk charge refers to the risk of loss in the trading portfolio due to changes in market variables such as interest rates, equity prices, foreign exchange rates, and commodity prices. The charge is based on the modified duration and interest rate shocks for each maturity. Choice A refers to liquidity risk and Choice C refers to credit risk, which are different types of risks. Choice D refers to interest rate gaps, which is not the same as modified duration and interest rate shocks.

Which of the Following Is an Adequate Definition of the Term