PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition

QUESTION NO: 1
Which of the following is FALSE?

A. Nick Leeson dealt in complex derivatives lacking transparency of pricing B. Nick Leeson also ran the back office for his trading area C. Nick Leeson claimed to be running an arbitrage book D. SIMEX made inquiries to Barings Bank about large margin calls on its positions

Correct Answer: A

QUESTION NO: 2
The Risk Management Infrastructure of an organization must:
I. To the extent possible, avoid silos of control and oversight
II. Have budgets set by the business unit leaders
III. Actively provide ongoing professional development for risk management staff and require them to be committed to standards of best practice, conduct and ethics in their work IV. Provide general risk management and related corporate governance training for employees of the organization as a Whole

A. I and III only B. I, III and IV only C. I only D. All of these are expected of the Risk Management Infrastructure

Correct Answer: B

QUESTION NO: 3
The hedging strategy employed by MG Refining & Marketing has been called:

A. Nothing because MG Refining & Marketing did not hedge its position B. Dynamic hedging C. A differential hedge D. A stacked hedge

Correct Answer: D

QUESTION NO: 4
Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:

A. The Board of Directors alone B. The Board of Directors, but only if the Blue Ribbon Panel affirms the change C. 34 of all Members D. The Board of Directors and a majority of the Members

Correct Answer: D

QUESTION NO: 5
Which US regulatory authority resolved the restructuring of Washington Mutual?

A. The Federal Reserve Bank B. Federal Deposit Insurance Corporation C. The Office of Thrift Supervision D. None of the above

Correct Answer: C

QUESTION NO: 6
An Organization as a Whole must:
I. Provide an environment in which an Escalation Policy can be effective II. Commit itself to actual enforcement of corporate governance policies III. Provide ongoing education and training to all employees on the role of risk management and corporate governance in the organization IV. Publish an external auditor's opinion that the corporation is in compliance with the Board's publicly stated Standards of Corporate Governance

A. I, II and III only B. I, III and IV only C. I, II and IV only D. All of these are expectations of the Organization as a Whole

Correct Answer: D

QUESTION NO: 7
According to the Group of 30 Report, option contracts:

A. Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation B. Always generate credit risk to both counterparties C. Create no credit risk, since the buyer need not exercise the option D. Usually create credit risk only for the seller (to default by the buyer)

Correct Answer: A

QUESTION NO: 8
Which of the following was the key contributory risk factor to the problems at LTCM in the summer of 1998?
I. Model Risk
II. Lack of Transparency
III. Breakdown of Historical Correlations
IV. Over Regulation by Federal Regulators

A. I and III only B. All of these were key elements of the problems at LTCM C. III only D. III and IV only

Correct Answer: C

QUESTION NO: 9
A PRMIA member is offered a highly paid work assignment on the condition that some aspects of assignment are not to be done according to PRMIA standards.
What should they do?

A. Accept the assignment, and prior to doing any work, report the conflict of interest to the organization's compliance department B. The PRMIA member should place the integrity of the risk management profession and users of risk management above their own personal interests, and refuse the work C. Accept the assignment, produce and deliver two reports according to both standards D. Perform the assignment, noting in the final report the standards to which the assignment was done

Correct Answer: B

QUESTION NO: 10
Which of the following is part of the Group of 30 Report's market risk and stress testing recommendations?

A. To be consistent with regulatory capital measures, 10-day holding periods should be standardized for VaR reporting B. Historic simulations are not effective methods of stress testing C. Stress tests should incorporate changes in liquidity D. Market risk VaR measures should be multiplied by 3 to get to a stress test figure, as long as the VaR model has been back-tested

Correct Answer: C

PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition - 8009 Exam Questions