PDF Version DemoPRMIA PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition Sample Questions:
1. According to the Basel II standard, which of the following conditions must be satisfied before a bank can use
'mark-to-model' for securities in its trading book?
I. Marking-to-market is not possible
II. Market inputs for the model should be sourced in line with market prices III. The model should have been created by the front office IV. The model should be subject to periodic review to determine the accuracy of its performance
A) II and III
B) III and IV
C) I, II and IV
D) I, II, III and IV
2. Which of the following formulae correctly describes Component VaR. (p refers to the portfolio, and i is the i-th constituent of the portfolio. MVaR means Marginal VaR, and other symbols have their usual meanings.)
A) I and II
B) I
C) III
D) II
3. Which of the following are valid approaches to calculating potential future exposure (PFE) for counterparty risk:
I. Add a percentage of the notional to the mark-to-market value
II. Monte Carlo simulation
III. Maximum Likelihood Estimation
IV. Parametric Estimation
A) I and II
B) I, III and IV
C) III and IV
D) All of the able
4. A bullet bond and an amortizing loan are issued at the same time with the same maturity and with the same principal. Which of these would have a greater credit exposure halfway through their life?
A) The bullet bond
B) The amortizing loan
C) Indeterminate with the given information
D) They would have identical exposure half way through their lives
5. When pricing credit risk for an exposure, which of the following is a better measure than the others:
A) Mark-to-market
B) Notional amount
C) Expected Exposure (EE)
D) Potential Future Exposure (PFE)
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: A | Question # 3 Answer: A | Question # 4 Answer: A | Question # 5 Answer: C |
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