为什么D对

问题如下：

After reviewing the results of a successful mid-year stress test performed by EveRate Bank (ERB), a risk analyst at a national financial supervisory authority prepares a summary report showing how the quality of the bank’s overall risk management compares with that of its industry competitors. ERB determines its capital adequacy and planning based on an internal assessment of risks, asset-Liability efficiency, capital return analyses, and regulatory capital requirements. In preparing the report, the analyst uses five competitors as a proxy for the industry benchmark. The analyst assumes that individual trading positions for the bank and its competitors are of equal size. ERB reports assets and liabilities at market value. Relevant information about the bank and its peers under normal market conditions are shown below:

The analyst assumes that daily portfolio returns for ERB and its competitors are normally distributed with a common mean of zero and are serially independent to each other. Which of the following conclusions is most appropriate to make about how ERB’s performance compares to the industry benchmark?

选项：

A.

ERB’s market risk of its trading book is higher

B.

ERB’s liquidity trading risk is higher

C.

ERB’s credit quality is higher

D.

ERB’s Basel III Tier 1 leverage ratio is higher

解释：

D is correct. The Basel III Tier 1 leverage ratio = (Core Tier 1 capital)/(Leverage exposure) = 2/31 = 6.45%, which is higher than the average 6% for the industry peers. A higher leverage ratio for capital requirement is better.
A is incorrect. Under the distributional assumption, VaR at a 99% confidence level is approximately equal to ES at a 97.5% confidence level. ES is the average observation of losses that exceed the VaR. Therefore, if Bank ERB’s 99% ES is equal to the industry benchmark’s 99% VaR, it can be argued that Bank ERB’s market risk is lower, not higher, than the benchmark since all of the benchmark observations above the VaR will need to be higher than USD 7 million. Also, the portfolio return distributions of ERB and the peer firms may be different.
B is incorrect. There is not enough information to determine the levels of liquidity trading risk (or, e.g., Liquidity adjusted VaR) for both the bank and the benchmark. ERB’s liquidity trading risk is not necessarily higher just because it has a smaller number of trading positions. A higher number of trading positions may induce a diversification effect, which lowers market risk. However, diversification has no effect on liquidity trading risk.
C is incorrect. Assuming a constant hazard rate, and using the hazard rate process, the average default probability for the industry benchmark = PD = 1 – exp(-l*t) = 1 – exp(-0.05*1) = 4.88%, where t = 1 year. Since ERB’s PD (= 5%) is higher, its credit quality is lower than that of the benchmark.