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Question for CAIIB Elective Paper Risk Management - Quiz / Questions / MCQ in English

Last Update on : October 12, 2026

Duration: 120 · Questions: 100 · Max Marks: 100

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To boost your performance in CAIIB Elective Paper Risk Management exam, practice each question regularly and with focus. Every question tests your subject understanding, so solve them one at a time. Taking a quiz improves your speed and accuracy. Practicing topic-wise MCQs. Students benefit greatly from reviewing questions with answer keys, which help clarify concepts and strengthen Questions knowledge for success in CAIIB Elective Paper Risk Management exams.

Latest CAIIB Elective Paper Risk Management Exam Question (Objective Questions), MCQ in English

Subjects : Risk Management

Question Bank CAIIB Elective Paper (Risk Management) Exam - English

Risk Management

Q 1 :
What does market risk primarily refer to in banking?
  1. A.Risk of non-repayment of loans
  2. B.Risk arising from movement in market prices
  3. C.Risk of employee fraud
  4. D.Risk of operational failures
Q 2 :
Which of the following is not a component of market risk?
  1. A.Interest rate risk
  2. B.Credit risk
  3. C.Equity risk
  4. D.Foreign exchange risk
Q 3 :
What is the main source of interest rate risk for banks?
  1. A.Foreign exchange fluctuation
  2. B.Mismatch in the maturity of assets and liabilities
  3. C.Change in commodity prices
  4. D.Increase in employee cost
Q 4 :
Which type of market risk arises due to changes in foreign currency rates?
  1. A.Equity risk
  2. B.Credit risk
  3. C.Forex risk
  4. D.Operational risk
Q 5 :
What is equity price risk?
  1. A.Risk from changes in equity ownership
  2. B.Risk due to shareholding concentration
  3. C.Risk arising from adverse changes in stock market prices
  4. D.Risk of losing equity capital
Q 6 :
Commodity price risk is associated with which type of instruments?
  1. A.Foreign exchange
  2. B.Shares
  3. C.Bonds
  4. D.Agricultural or metal commodities
Q 7 :
Why is market risk important in banking operations?
  1. A.It affects customer loyalty
  2. B.It impacts the branch network
  3. C.It can significantly impact the valuation of trading portfolios
  4. D.It improves operational efficiency
Q 8 :
Which Basel Accord formally introduced market risk as part of capital requirements?
  1. A.Basel I
  2. B.Basel II
  3. C.Basel III
  4. D.Basel IV
Q 9 :
What is the regulatory capital requirement for market risk commonly known as?
  1. A.Capital buffer
  2. B.Trading book capital
  3. C.Market risk capital charge
  4. D.Risk-weighted capital
Q 10 :
Which asset class is least likely to be affected by equity price risk?
  1. A.Corporate shares
  2. B.Mutual fund units
  3. C.Government bonds
  4. D.Stock index derivatives
Q 11 :
What is the risk of loss arising from changes in interest rates called?
  1. A.Liquidity risk
  2. B.Interest rate risk
  3. C.Inflation risk
  4. D.Credit spread risk
Q 12 :
In which portfolio does market risk primarily arise?
  1. A.Banking book
  2. B.Trading book
  3. C.Loan portfolio
  4. D.Fixed deposit portfolio
Q 13 :
What is the typical behavior of market risk in a highly volatile market?
  1. A.It reduces significantly
  2. B.It remains unchanged
  3. C.It increases
  4. D.It becomes irrelevant
Q 14 :
What does the term “systematic risk” generally refer to in the context of market risk?
  1. A.Risk of fraud
  2. B.Risk of interest rate fluctuations
  3. C.Risk inherent to the entire market or market segment
  4. D.Risk in a specific loan portfolio
Q 15 :
Market risk can be directly measured using which of the following methods?
  1. A.KYC analysis
  2. B.Value at Risk (VaR)
  3. C.Loan default rate
  4. D.Net interest margin
Q 16 :
What is the purpose of capital allocation for market risk?
  1. A.To improve bank profitability
  2. B.To comply with customer service guidelines
  3. C.To cover potential losses from adverse market movements
  4. D.To maintain asset quality
Q 17 :
Market risk is typically not associated with which of the following?
  1. A.Derivative transactions
  2. B.Trading in government securities
  3. C.Mutual fund investment
  4. D.Fixed-term deposit
Q 18 :
What is basis risk in market risk management?
  1. A.Risk due to low liquidity
  2. B.Risk due to mismatch in asset and liability maturity
  3. C.Risk from imperfect hedging instruments
  4. D.Risk due to interest rate fluctuation only
Q 19 :
What is the primary reason for regulatory authorities to monitor market risk?
  1. A.To track deposit growth
  2. B.To ensure employee efficiency
  3. C.To maintain systemic financial stability
  4. D.To manage loan disbursements
Q 20 :
Which of the following tools is not used for measuring market risk?
  1. A.VaR
  2. B.Duration analysis
  3. C.Gap analysis
  4. D.Credit scoring
Q 21 :
What does VaR (Value at Risk) measure in market risk management?
  1. A.Total investment return
  2. B.Expected average return
  3. C.Maximum potential loss over a specific time period at a given confidence level
  4. D.Net asset value fluctuation
Q 22 :
Which one is NOT a method of calculating VaR?
  1. A.Historical simulation
  2. B.Monte Carlo simulation
  3. C.Regression analysis
  4. D.Variance-covariance method
Q 23 :
What is the primary assumption in the variance-covariance method of VaR?
  1. A.Returns are non-random
  2. B.Returns follow a uniform distribution
  3. C.Returns are normally distributed
  4. D.There is zero volatility
Q 24 :
What is the role of stress testing in market risk management?
  1. A.To identify fraudulent accounts
  2. B.To assess the impact of extreme market scenarios
  3. C.To evaluate customer satisfaction
  4. D.To determine loan eligibility
Q 25 :
Duration analysis is mainly used to measure which type of risk?
  1. A.Credit risk
  2. B.Liquidity risk
  3. C.Interest rate risk
  4. D.Equity risk
Q 26 :
What does Modified Duration indicate?
  1. A.Interest earned on a bond
  2. B.Bond maturity
  3. C.Price sensitivity of a bond to changes in interest rates
  4. D.Yield curve slope
Q 27 :
What is basis risk in interest rate markets?
  1. A.Risk of changing currency rates
  2. B.Risk due to a mismatch in the benchmark interest rate used
  3. C.Risk due to economic slowdown
  4. D.Risk of a customer not repaying the loan
Q 28 :
Which type of risk is caused due to the movement in foreign currency exchange rates?
  1. A.Interest rate risk
  2. B.Currency risk
  3. C.Liquidity risk
  4. D.Political risk
Q 29 :
The impact of yield curve changes is primarily associated with which risk?
  1. A.Operational risk
  2. B.Market risk
  3. C.Equity risk
  4. D.Credit risk
Q 30 :
Which of the following risk types is the most volatile in nature?
  1. A.Operational risk
  2. B.Market risk
  3. C.Credit risk
  4. D.Strategic risk
Q 31 :
What is a risk limit in market risk management?
  1. A.A threshold for daily expenses
  2. B.Maximum exposure that a bank can take under defined policies
  3. C.Number of customers a bank can serve
  4. D.Regulatory reporting deadline
Q 32 :
What is back-testing in VaR methodology?
  1. A.Forecasting market returns
  2. B.Testing models before implementation
  3. C.Comparing VaR estimates with actual outcomes
  4. D.Calculating capital adequacy
Q 33 :
The trading book of a bank refers to?
  1. A.Record of loan repayments
  2. B.Portfolio of assets held for resale or trading
  3. C.Record of employee salaries
  4. D.Customer complaint register
Q 34 :
What is the purpose of regulatory capital against market risk?
  1. A.To meet staff salary obligations
  2. B.To ensure compliance with credit scoring
  3. C.To provide a cushion against adverse market movements
  4. D.To support operational infrastructure
Q 35 :
Delta, in the context of options risk management, refers to?
  1. A.Total transaction cost
  2. B.Change in option price for a unit change in the price of the underlying asset
  3. C.Transaction delay time
  4. D.Volatility of interest rates
Q 36 :
What is Gamma in options terminology?
  1. A.Total return
  2. B.Rate of change of Delta
  3. C.Capital gain
  4. D.Risk-free rate
Q 37 :
Who is responsible for monitoring market risk exposures in a bank?
  1. A.HR Department
  2. B.Internal Audit
  3. C.Risk Management Department
  4. D.Treasury Back Office
Q 38 :
Which of the following does not influence market risk significantly?
  1. A.Political instability
  2. B.Regulatory changes
  3. C.Change in office premises
  4. D.Global economic trends
Q 39 :
Which committee in a bank is primarily responsible for managing market risk?
  1. A.Credit Committee
  2. B.HR Committee
  3. C.Asset-Liability Committee (ALCO)
  4. D.Audit Committee
Q 40 :
What is Liquidity Gap Analysis used for in ALM?
  1. A.Credit scoring
  2. B.Assessing future profitability
  3. C.Managing funding mismatches over time buckets
  4. D.Recruiting staff
Q 41 :
A flat yield curve implies?
  1. A.Higher short-term rates only
  2. B.Interest rates are falling
  3. C.Interest rates are constant across maturities
  4. D.Steep interest rate increase
Q 42 :
The key risk faced by banks when interest rates suddenly rise is?
  1. A.Profit risk
  2. B.Reinvestment risk
  3. C.Market risk due to bond value decline
  4. D.Political risk
Q 43 :
When interest rates rise, the price of bonds generally?
  1. A.Increases
  2. B.Decreases
  3. C.Remains the same
  4. D.Doubles
Q 44 :
What does Beta measure in market risk?
  1. A.Credit rating volatility
  2. B.Sensitivity of a security to overall market movement
  3. C.Cost of borrowing
  4. D.Level of inflation
Q 45 :
Interest rate derivatives are used to?
  1. A.Increase interest income
  2. B.Hedge against interest rate fluctuations
  3. C.Reduce employee cost
  4. D.Increase market volatility
Q 46 :
What is Value at Risk (VaR) used for in Basel norms?
  1. A.Loan classification
  2. B.Measuring operational risk
  3. C.Capital requirement for market risk
  4. D.Customer credit scoring
Q 47 :
What is stress testing required for under Basel guidelines?
  1. A.Annual performance reviews
  2. B.Staff assessment
  3. C.Assessing resilience under extreme conditions
  4. D.Customer surveys
Q 48 :
What is the Minimum Holding Period (MHP) as per market risk guidelines for traded assets?
  1. A.5 days
  2. B.10 days
  3. C.30 days
  4. D.90 days
Q 49 :
What does Incremental Risk Charge (IRc) under Basel refer to?
  1. A.Additional operational losses
  2. B.Additional capital for non-trading book
  3. C.Additional capital for credit migration and default risk
  4. D.Overdue interest penalties
Q 50 :
Which of the following is a limitation of VaR?
  1. A.It's based on probabilities
  2. B.It covers extreme losses accurately
  3. C.It assumes perfect liquidity
  4. D.It works for long-term analysis

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