2) Which of the following relationship is true:

3) Vasicek's Model of Interest Rate is based on:

4) A firm has a current asset value of $100 and asset volatility of 40%. The quasi-debt leverage ratio is 60% with a debt maturity at a one year horizon. If the constantly compounded interest rate is 5% the discounted expected recovery value for the debt is:

5) In the above question(question #4) the probability of default of the risky bond of the firm is:

6) A equity derivatives desk of a bank has a $500 million in a fairly iliquid stock (where small amounts of stock can cause a big movement in price). The trader has estimated that the amount of stock that can be transacted in one day without adversely affecting the price is $50 million. If the daily standard deviation of price moves is 1.5% then with a 95% confidence level the amount that the trader should reserve against daily price moves would be:

7)A swaps trader's position has just two cash flows, a 5-year flow of $100 and a 10-year flow of minus $100. The current 5-yr and 10-yr zero coupon rates are 6% and 7% respectively. The 5-year equivalents of the portfolio is:

8)In the previous question (question #7) the weighted duration of the portfolio is:

9)One of the best tools for measuring & managing residual options risk on a trading desk is:

10)Carr approach to hedging barrier options uses: