PRMIA PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition - 8008 Exam Questions

QUESTION NO: 1
According to the Basel framework, shareholders' equity and reserves are considered a part of:

QUESTION NO: 2
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:

QUESTION NO: 3
Which of the following cannot be used to address the issue of heavy tails when modeling market returns

QUESTION NO: 4
An investor holds a bond portfolio with three bonds with a modified duration of 5, 10 and 12 years respectively. The bonds are currently valued at $100, $120 and $150. If the daily volatility of interest rates is
2%, what is the 1-day VaR of the portfolio at a 95% confidence level?

QUESTION NO: 5
Which of the following statements are true:
I. The set of UoMs used for frequency and severity modeling should be identical II. UoMs can be grouped together into larger combined UoMs using judgment based on the knowledge of the business III. UoMs can be grouped together into combined UoMs using statistical techniques IV. One may use separate sets of UoMs for frequency and severity modeling

QUESTION NO: 6
The generalized Pareto distribution, when used in the context of operational risk, is used to model:

QUESTION NO: 7
Which of the following statements are true:
I. Stress testing, if exhaustive, can replace traditional risk management tools such as value-at-risk (VaR) II. Stress tests can be particularly useful in identifying risks with new products III. Stress testing is distinct from a bank's ICAAP carried out periodically IV. Stress testing is a powerful communication tool that can convey risks to decisionmakers in an organization

QUESTION NO: 8
The probability of default of a security over a 1 year period is 3%. What is the probability that it would not have defaulted at the end of four years from now?

QUESTION NO: 9
The capital adequacy ratio applied to risk weighted assets for the calculation of capital requirements for credit risk per Basel II is:

QUESTION NO: 10
If the loss given default is denoted by L, and the recovery rate by R, then which of the following represents the relationship between loss given default and the recovery rate?