QUESTION 108
Which of the following was not a policy response introduced by Basel 2.5 in response to the global financial crisis:

QUESTION 109
If the full notional value of a debt portfolio is $100m, its expected value in a year is $85m, and the worst value of the portfolio in one year’s time at 99% confidence level is $60m, then what is the credit VaR?

QUESTION 110
Which of the following statements is true:
I. Expected credit losses are charged to the unit’s P&L while unexpected losses hit risk capital reserves.
II. Credit portfolio loss distributions are symmetrical
III. For a bank holding $10m in face of a defaulted debt that it acquired for $2m, the bank’s legal claim in the bankruptcy court will be $10m.
IV. Thelegal claim in bankruptcy court for an over the counter derivatives contract will be the notional value of the contract.

QUESTION 111
An assumption regarding the absence of ratings momentum is referred to as:

QUESTION 112
An investor enters into a 5-year total return swap with Bank A, with the investor paying a fixed rate of 6% annually on a notional value of $100m to the bank and receiving thereturns of the S&P500 index with an identical notional value. The swap is reset monthly, ie the payments are exchanged monthly. On Jan 1 of the fourth year, after settling the last month’s payments, the bank enters bankruptcy. What is the legal claim thatthe hedge fund has against the bank in the bankruptcy court?

QUESTION 113
Which of the following statements are true?
I. Retail Risk Based Pricing involves using borrower specific data to arrive at both credit adjudication and pricing decisions II. An integrated ‘Risk Information Management Environment’ includes two elements – people and processes III. A Logical Data Model (LDM) lays down the relationships between data elements that an organization stores IV. Reference Data and Metadata refer to the same thing

QUESTION 114
There are three bonds in a diversified bond portfolio, whose default probabilities are independent of each other and equal to 1%, 2% and 3% respectively over a 1 year time horizon. Calculate the probability that none of the three bonds will default.

QUESTION 115
When pricing credit risk for an exposure, which of the following is a better measure than the others:

QUESTION 116
If P be the transition matrix for 1 year, how can we find the transition matrix for 4 months?

QUESTION 117
Which of the following is not an event of default covered in the ISDA Master Agreement?
I. failure to pay or deliver
II. credit support default
III. merger without assumption
IV. Bankruptcy

QUESTION 118
The frequency distribution for operational risk loss events can be modeled by which of the following distributions:
I. The binomial distribution
II. The Poisson distribution
III. The negative binomial distribution
IV. The omega distribution

QUESTION 119
Which of the following statements are true:
I. The sum of unexpected losses for individual loans in a portfolio is equal to the total unexpected loss for the portfolio.
II. The sum of unexpected losses for individual loans in a portfolio is less than the total unexpected loss for the portfolio.
III. The sum of unexpected losses forindividual loans in a portfolio is greater than the total unexpected loss for the portfolio.
IV. The unexpected loss for the portfolio is driven by the unexpected losses of the individual loans in the portfolio and the default correlation between these loans.

QUESTION 120
Conditional default probabilities modeled under CreditPortfolio view use a:

QUESTION 121
If the odds of default are 1:5, what is the probability of default?

QUESTION 122
For a group of assets known to be positively correlated, what is the impact on economic capital calculations if we assume the assets to be independent (or uncorrelated)?

QUESTION 123
What isthe risk horizon period used for credit risk as generally used for economic capital calculations and as required by regulation?

QUESTION 124
A risk management function is best organized as:

QUESTION 125
Which of the following statements are true:
I. Capital adequacy implies the ability of a firm to remain a going concern II. Regulatory capital and economic capital are identical as they target the same objectives III. The role of economic capital is to provide a buffer against expected losses IV. Conservative estimates of economic capital are based upon a confidence level of 100%

QUESTION 126
Which of the following are true:
I. The total of the component VaRs for all components of a portfolio equals the portfolio VaR.
II. The total of the incremental VaRs for each position in a portfolio equals the portfolio VaR.
III. Marginal VaR and incremental VaR are identical for a $1 change in the portfolio.
IV. The VaR for individual components of a portfolio is sub-additive, ie the portfolio VaR is less than (or in extreme cases equal to) the sum of the individual VaRs.
V. The component VaR for individual components of a portfolio is sub-additive, ie the portfolio VaR is less than the sum of the individual component VaRs.

QUESTION 127
For a bank using the advanced measurement approach to measuring operational risk, which of the following brings the greatest ‘model risk’ to its estimates: