PRMIA Operational Risk Manager (ORM) - 8010 Exam Questions

QUESTION NO: 1
A risk analyst peforming PCA wishes to explain80% of the variance. The first orthogonal factor has a volatility of 100, and the second 40, and the third 30. Assume there are no other factors. Which of the factors will be included in the final analysis?

QUESTION NO: 2
For a 10 year interest rate swap, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)

QUESTION NO: 3
For a loan portfolio, expected losses are charged against:

QUESTION NO: 4
Under the standardized approach to calculating operational risk capital under Basel II, negative regulatory capital charges for any of the business units:

QUESTION NO: 5
Which of the following is not a measure of risk sensitivity of some kind?

QUESTION NO: 6
Which of the following are valid methods for selecting an appropriate model from the model space for severity estimation:
I. Cross-validation method
II. Bootstrap method
III. Complexity penalty method
IV. Maximum likelihood estimation method

QUESTION NO: 7
Which of the following should be included when calculating the Gross Income indicator used to calculate operational risk capital under the basic indicator and standardized approaches underBasel II?

QUESTION NO: 8
Which of the following is a cause ofmodel risk in risk management?

QUESTION NO: 9
Which of the following statements is true:
I. Confidence levels for economic capital calculations are driven by desired credit ratings II. Loss distributions for operational risk are affected more by theseverity distribution than the frequency distribution III. The Advanced Measurement Approach (AMA) referred to in the Basel II standard is a type of a Loss Distribution Approach (LDA) IV. The loss distribution for operational risk under the LDA (Loss Distribution Approach) is estimated by separately estimating the frequency and severity distributions.

QUESTION NO: 10
If A and B be two debt securities, which of the following is true?

QUESTION NO: 11
Which of the following is not a parameter to be determined by the risk manager that affects the level of economic credit capital:

QUESTION NO: 12
Which of the following statements are correct:
I. A training set is a set of data used to create a model, while a control set is a set of data is used to prove that the model actually works II. Cleansing, aggregating or ensuring data integrity is a task for the IT department, and is not a risk manager's responsibility III. Lack of information on the quality of underlying securities and assets was a major cause of the collapse in the CDO markets during the credit crisis that started in 2007 IV. The problem of lack of historical data can be addressed reasonably satisfactorily by using analytical approaches

QUESTION NO: 13
Which of the following distributions is generally not used for frequency modeling for operational risk