CDP CDP Portfolio Management & Analytics

Question 1

What does 'Value at Risk' (VaR) measure in a derivatives portfolio?

Accepted Answer

The maximum loss a portfolio is expected to experience with a given confidence level over a specific period

Answer

The maximum profit achievable from a portfolio

Answer

The average daily return of a derivatives portfolio

Answer

The total notional value of all derivatives positions

Question 2

What is 'portfolio Greeks' analysis used for?

Accepted Answer

Measuring the aggregate sensitivities of a derivatives portfolio to various market factors

Answer

Calculating historical performance metrics of a derivatives portfolio

Answer

Evaluating counterparty credit risk across positions

Answer

Determining the tax implications of derivatives transactions

Question 3

What is 'correlation risk' in a multi-asset derivatives portfolio?

Accepted Answer

The risk that assumed correlations between assets change, affecting portfolio performance

Answer

The risk that interest rates and bond prices move in the same direction

Answer

The risk that options expire worthless due to low volatility

Answer

The risk of executing trades at unfavorable prices

Question 4

What is the purpose of 'stress testing' a derivatives portfolio?

Accepted Answer

To evaluate how a portfolio performs under extreme but plausible market scenarios

Answer

To verify that trade execution systems function under high volume

Answer

To test the accuracy of derivatives pricing models

Answer

To assess counterparty creditworthiness

Question 5

What does 'net exposure' mean in derivatives portfolio management?

Accepted Answer

The combined directional risk after offsetting long and short positions

Answer

The gross notional value of all derivatives positions

Answer

The total premium paid for all options positions

Answer

The maximum potential loss from a single position

Question 6

What is 'P&L attribution' in derivatives portfolio management?

Accepted Answer

Breaking down portfolio profit and loss into contributions from individual risk factors such as delta and vega

Answer

Distributing profits among traders on a derivatives desk

Answer

Allocating capital to various derivatives strategies

Answer

Reporting derivatives gains to tax authorities