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PRMIA Credit and Counterparty Manager (CCRM) Certificate - 8011 Exam Questions

QUESTION NO: 1
The accuracy of a VaR estimate based on a Monte carlo simulation of portfolio prices is affected by:
I). The shape of the distribution of portfolio values
II). The number simulations carried out
III). The confidence level selected for the VaR estimate

A. I, II and III B. II and III C. III D. II

Correct Answer: A

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QUESTION NO: 2
Which of the following is additive, ie equal to the sum of its components

A. Specific VaR B. Incremental VaR C. Conditional VaR D. Component VaR

Correct Answer: D

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QUESTION NO: 3
Which of the following represent the parameters that define a VaR estimate?

A. confidence level and the holding period B. confidence level and the underlying stochastic process C. confidence level, the holding period and expected volatility D. trading position and distribution assumption

Correct Answer: A

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QUESTION NO: 4
Which of the following is not a risk faced by a bank from holding a portfolio of residential mortgages?

A. The risk that the homeowners will pay the mortgage off before they are due B. The risk that CDS spreads on the bank's debt will rise making funding more expensive C. The risk that the homeowners will not be able to pay their mortgage when they are due D. The risk that mortgage interest rates will rise in the future

Correct Answer: B

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QUESTION NO: 5
The diversification effect is responsible for:

A. VaR being applicable only to short term horizons B. the sub-additivity property of market risk VaR assessments C. total VaR numbers being greater than the sum of the individual VaRs for underlying portfolios D. the super-additivity property of market risk VaR assessments

Correct Answer: B

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QUESTION NO: 6
Under the KMV Moody's approach to calculating expecting default frequencies (EDF), firms' default on obligations is likely when:

A. expected asset values one year hence are below total liabilities B. asset values reach a level between short term debt and total liabilities C. asset values reach a level below total liabilities D. asset values reach a level below short term debt

Correct Answer: B

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QUESTION NO: 7
When compared to a low severity high frequency risk, the operational risk capital requirement for a medium severity medium frequency risk is likely to be:

A. Higher B. Zero C. Unaffected by differences in frequency or severity D. Lower

Correct Answer: A

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QUESTION NO: 8
A long position in a credit sensitive bond can be synthetically replicated using:

A. a long position in a treasury bond and a short position in a CDS B. a long position in a treasury bond and a long position in a CDS C. a short position in a treasury bond and a long position in a CDS D. a short position in a treasury bond and a short position in a CDS

Correct Answer: A

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QUESTION NO: 9
For a back office function processing 15,000 transactions a day with an error rate of 10 basis points, what is the annual expected loss frequency (assume 250 days in a year)

A. 3750 B. 375 C. 37500 D. 0.06

Correct Answer: A

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QUESTION NO: 10
Which of the following belong in a credit risk report?

A. Largest exposures by counterparty B. All of the above C. Exposures by industry D. Exposures by country

Correct Answer: B

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QUESTION NO: 11
A bank prices retail credit loans based on median default rates. Over the long run, it can expect:

A. A reduction in the rate of defaults B. Overestimation of risk and overpricing, leading to loss of market share C. Correct pricing of risk in the retail credit portfolio D. Underestimation and therefore underpricing of risk in it retail portfolio

Correct Answer: D

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QUESTION NO: 12
Which of the following are attributes of a robust stress testing programme at a bank?

A. Written policies and procedures B. Robust systems infrastructure C. All of the above D. Data of appropriate quality and granularity

Correct Answer: C

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QUESTION NO: 13
Loss from a lawsuit from an employee due to physical harm caused while at work is categorized per Basel II as:

A. Unsafe working environment B. Execution delivery and process management C. Employment practices and workplace safety D. Damage to physical assets

Correct Answer: C

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QUESTION NO: 14
Conditional default probabilities modeled under CreditPortfolio view use a:

A. Probit function B. Logit function C. Altman's z-score D. Power function

Correct Answer: B

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