PRMIA 8008 Exam III: Risk Management Frameworks . Operational Risk . Credit Risk . Counterparty Risk . Market Risk . ALM . FTP – 2015 Edition Online Training
PRMIA 8008 Online Training
The questions for 8008 were last updated at Nov 20,2024.
- Exam Code: 8008
- Exam Name: Exam III: Risk Management Frameworks . Operational Risk . Credit Risk . Counterparty Risk . Market Risk . ALM . FTP - 2015 Edition
- Certification Provider: PRMIA
- Latest update: Nov 20,2024
An equity manager holds a portfolio valued at $10m which has a beta of 1.1. He believes the market may see a dip in the coming weeks and wishes to eliminate his market exposure temporarily. Market index futures are available and the current futures notional on these is $50,000 per contract.
Which of the following represents the best strategy for the manager to hedge his risk according to his views?
- A . Sell 200 futures contracts
- B . Buy 220 futures contracts
- C . Sell 220 futures contracts
- D . Liquidate his portfolio as soon as possible
Which of the following best describes Altman’s Z-score
- A . A calculation of default probabilities
- B . A regression of probability of survival against a given set of factors
- C . A numerical computation based upon accounting ratios
- D . A standardized z based upon the normal distribution
Which of the following are considered asset based credit enhancements?
I. Collateral
II. Credit default swaps
III. Close out netting arrangements
IV. Cash reserves
- A . II and IV
- B . I, II and IV
- C . I and IV
- D . I and III
When considering a request for a loan from a retail customer, which of the following factors is relevant for a bank to consider:
- A . The other retail loans in its portfolio
- B . The credit worthiness of the retail customer
- C . The contribution this new loan would bring to total portfolio risk
- D . All of the above
Which of the following statements is true:
I. When averaging quantiles of two Pareto distributions, the quantiles of the averaged 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 than the 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.
- A . II and III
- B . III and IV
- C . I and II
- D . All statements are true
The largest 10 losses over a 250 day observation period are as follows. Calculate the expected shortfall at a 98% confidence level:
20m
19m
19m
17m
16m
13m
11m
10m
9m
9m
- A . 19.5
- B . 14.3
- C . 18.2
- D . 16
Which of the following describes rating transition matrices published by credit rating firms:
- A . Expected ex-ante frequencies of migration from one credit rating to another over a one year period
- B . Probabilities of default for each credit rating class
- C . Probabilities of ratings transition from one rating to another for a given set of issuers
- D . Realized frequencies of migration from one credit rating to another over a one year period
Under the KMV Moody’s approach to calculating expecting default frequencies (EDF), firms’ default on obligations is likely when:
- A . expected asset values one year hence are below total liabilities
- B . asset values reach a level below short term debt
- C . asset values reach a level below total liabilities
- D . asset values reach a level between short term debt and total liabilities
If the default hazard rate for a company is 10%, and the spread on its bonds over the risk free rate is 800 bps, what is the expected recovery rate?
- A . 40.00%
- B . 20.00%
- C . 8.00%
- D . 0.00%
Which of the following are considered counterparty based credit enhancements?
I. Collateral
II. Credit default swaps
III. Close out netting arrangements
IV. Guarantees
- A . I and III
- B . II and IV
- C . I, II and IV
- D . I and IV
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