1) The principal agent problem that exists for bank trading activities can be reduced through
A) creation of internal controls that combine trading activities with bookkeeping.
B) creation of internal controls that separate trading activities from bookkeeping.
C) elimination of regulation of banking.
D) elimination of internal controls.
2) Banks develop statistical models to calculate their maximum loss over a given time period. This approach is known as the
A) stress testing approach.
B) value at risk approach.
C) trading loss approach.
D) doomsday approach.
3) When banks calculate the losses the institution would incur if an unusual combination of bad events happened, the bank is using the ________ approach.
A) stress test
B) value at risk
C) trading loss
D) maximum value