Explanation:
"A rogue trader within an institution" is an example of operational risk. "Stock XYZ decreases in price due to a market crisis" is an example of equity price risk. "Using a put option to hedge an equity exposure" is an example of basis risk. "Counterparty sues bank to avoid meeting its obligations" is an example of legal risk.
(Book 1, Module 1.2, LO 1.e)
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Question 91
Match the following events to the corresponding risk type.
A
1: legal risk; 2: credit risk; 3: strategic risk; 4: credit risk.
B
1: business risk; 2: market risk; 3: market risk; 4: settlement risk.
C
1: operational risk; 2: equity price risk; 3: basis risk; 4: legal risk.
D
1: reputation risk; 2: basis risk; 3: credit risk; 4: legal risk.
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