Stock Jobs Risk Management in Securities

Question 1

What does 'market risk' refer to in the context of securities?

Accepted Answer

The risk of losses due to movements in market prices such as stock prices or interest rates

Answer

The risk that a broker will default on a trade

Answer

The risk of a company failing to meet regulatory requirements

Answer

The risk that an investor cannot find a buyer for their securities

Question 2

What is Value at Risk (VaR)?

Accepted Answer

A statistical measure estimating the potential loss of a portfolio over a defined time period at a given confidence level

Answer

The maximum possible loss on a portfolio over any time period

Answer

The average annual return of a security adjusted for inflation

Answer

The ratio of a stock's price to its intrinsic value

Question 3

Which type of risk can be reduced through diversification?

Accepted Answer

Unsystematic (idiosyncratic) risk

Answer

Systematic risk

Answer

Market risk

Answer

Interest rate risk

Question 4

What does a stock's beta measure?

Accepted Answer

The stock's price volatility relative to the overall market

Answer

The stock's dividend yield relative to the market

Answer

The ratio of the stock's earnings to its price

Answer

The stock's average daily trading volume

Question 5

What is the primary purpose of a stop-loss order in risk management?

Accepted Answer

To limit potential losses by triggering a sale when the price falls to a set level

Answer

To automatically buy more shares when prices drop

Answer

To lock in profits by selling when the price rises above a target

Answer

To prevent a broker from executing trades without client approval

Question 6

Which risk management strategy involves taking an offsetting position in a related security to reduce risk?

Accepted Answer

Hedging

Answer

Diversification

Answer

Leveraging

Answer

Short selling

Question 7

What is 'credit risk' in securities markets?

Accepted Answer

The risk that a counterparty or issuer will fail to meet its financial obligations

Answer

The risk that interest rates will rise, reducing bond prices

Answer

The risk that a security cannot be sold quickly at a fair price

Answer

The risk of losses from fraudulent trades