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VCE
In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may borrow up to ___ of the value of the securities from their brokers.
A. 30%
B. 40%
C. 50%
D. 60%
The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:
A. Legal risk
B. Strategic risk
C. Reputational risk
D. Geopolitical risk
Why is economic capital across market, credit and operational risks simply added up to arrive at an estimate of aggregate economic capital in practice?
A. Market, credit and operational risks are perfectly correlated which justifies adding up their associated economic capital.
B. In practice, it is very difficult to estimate the correlations between the risk categories and as a result a conservative estimate is obtained by adding up the risks.
C. Regulators require banks to add up economic capital across market, credit and operational risks.
D. Since market, credit and operational risks are significantly different measures of risk, there is no
diversification benefit to computing economic capital to banks across types of risks.