Read Online 8010 Test Practice Test Questions Exam Dumps [Q48-Q67] – Unlimited Lifetime Access Free Exams PDF

NEW QUESTION 48
A loan portfolio’s full notional value is $100, and its value in a worst case scenario at the 99% level of confidence is $65. Expected losses on the portfolio are estimated at 10%. What is the level of economic capital required to cushion unexpected losses?

25

65

10

35

NEW QUESTION 49
Which of the following are valid criticisms of value at risk:
I. There are many risks that a VaR framework cannot model
II. VaR does not considerliquidity risk
III. VaR does not account for historical market movements
IV. VaR does not consider the risk of contagion

I, II and IV

I and III

II and IV

All of the above

NEW QUESTION 50
What would be the consequences of a model of economic risk capital calculation that weighs all loans equallyregardless of the credit rating of the counterparty?
I. Create an incentive to lend to the riskiest borrowers
II. Create an incentive to lend to the safest borrowers
III. Overstate economic capital requirements
IV. Understate economic capitalrequirements

III only

I and IV

II and III

I only

NEW QUESTION 51
Which of the following does not affect the credit risk facing a lender institution?

The applicability or otherwise of mark tomarket accounting to the institution

Credit ratings of individual borrowers

The state of the economy

The degree of geographical or sectoral concentration in the loan book

NEW QUESTION 52
Which of the following statements are correct in relation to the financial system just prior to the current financial crisis:
I. The system was robustagainst small random shocks, but not against large scale disturbances to key hubs in the network II. Financial innovation helped reduce the complexity of the financial network III. Knightian uncertainty refers to risk that can be quantified and measured IV. Feedback effects under stress accentuated liquidity problems

I, II and IV

II and III

I and IV

III and IV

NEW QUESTION 53
If the cumulative default probabilities of default for years 1 and 2 for a portfolio of credit risky assets is 5% and 15% respectively, what is the marginal probability of default in year 2 alone?

15.79%

10.53%

10.00%

11.76%

NEW QUESTION 54
For a given mean, which distribution would you prefer for frequency modeling where operational risk events are considered dependent, or in other words are seen as clustering together (as opposed to being independent)?

Binomial

Gamma

Negative binomial

Poisson

NEW QUESTION 55
There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the two?

0%

100%

40%

25%

NEW QUESTION 56
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:

Zero

Lower

Higher

Unaffected by differences in frequency or severity

NEW QUESTION 57
Which of the following formulae describes CVA (Credit Valuation Adjustment)? All acronyms have their usual meanings (LGD=Loss Given Default, ENE=Expected Negative Exposure, EE=Expected Exposure, PD=Probability of Default, EPE=Expected Positive Exposure, PFE=Potential Future Exposure)

LGD * ENE * PD

LGD * EPE * PD

LGD * EE * PD

LGD * PFE * PD

NEW QUESTION 58
Which of the following credit risk models focuses on default alone and ignores credit migration when assessing credit risk?

CreditPortfolio View

The contingent claims approach

The CreditMetrics approach

The actuarial approach

NEW QUESTION 59
Which of the following statements is NOT true in relation to the recent financial crisis of 2007-08?

An intention to diversify from their core activities led all market participants to the same activities, which though appearing diversified at the bank’s level, created a concentration risk at the systemic level

The existence of central counterparties could have limited the damage caused by the financial crisis

Central banks had data on the interconnections between institutions, but poor understanding and analysis meant this data was never analyzed

Counterparty risk was difficult togauge as it was impossible to know who the counterparty’s counterparties were

NEW QUESTION 60
Which of the following is not a limitation of the univariate Gaussian model to capture the codependence structure between risk factros used for VaR calculations?

The univariate Gaussian model fails to fit to the empirical distributions of risk factors, notably their fat tails and skewness.

Determining the covariance matrix becomes an extremely difficult task as the number of risk factors increases.

It cannot capture linear relationships between risk factors.

A single covariance matrix is insufficient to describe the fine codependence structure among risk factors as non-linear dependencies or tail correlations are not captured.

NEW QUESTION 61
Which of the following need to be assumed to convert a transition probability matrix for a given time period to the transition probability matrix for another length of time:
I. Time invariance
II. Markov property
III. Normal distribution
IV. Zero skewness

I, II and IV

III and IV

I and II

II and III

NEW QUESTION 62
If the marginal probabilities of default for a corporate bond for years 1, 2 and 3 are 2%, 3% and 4% respectively, what is the cumulative probability of default at the end of year 3?

8.74%

9.58%

9.00%

91.26%

NEW QUESTION 63
Which of the following is closest to the description of a ‘risk functional’?

A risk functional is the distribution thatmodels the severity of a risk

A risk functional is a model distribution that is an approximation of the true loss distribution of a risk

Risk functional refers to the Kolmogorov-Smirnov distance

A risk functional assigns a penalty value for the difference between a model distribution and a risk’s severity distribution

NEW QUESTION 64
What does a middle office do for a trading desk?

Operations

Transaction data entry

Reconciliations

Risk analysis

NEW QUESTION 65
According to Basel II’s definition of operational loss event types, losses due to acts by third parties intended to defraud, misappropriate property or circumvent the law are classified as:

Internal fraud

Execution delivery and system failure

External fraud

Third party fraud

NEW QUESTION 66
Which of the following statements is true:
I. When averaging quantiles of two Pareto distributions, the quantiles of theaveraged models are equal to the geometric average of the quantiles of the original models based upon the number of data items in each original model.
II. When modeling severity distributions, we can only use distributions which have fewer parameters thanthe number of datapoints we are modeling from.
III. If an internal loss data based model covers the same risks as a scenario based model, they can can be combined using the weighted average of their parameters.
IV If an internal loss model and a scenario based model address different risks, the models can be combined by taking their sums.

II and III

III and IV

I and II

All statements are true

NEW QUESTION 67
Which of the following is true in relation to the application of Extreme Value Theory when applied to operational risk measurement?
I. EVT focuses on extreme losses that are generally not covered by standard distribution assumptions II. EVT considers the distribution of losses in the tails III. The Peaks-over-thresholds (POT) and the generalized Pareto distributions are used to model extreme value distributions IV. EVT is concerned with average losses beyond a given level of confidence

I and IV

II and III

I, II and III

I, II and IV

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