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
For an equity portfolio valued at V whose beta is, the value at risk at a 99% level of confidence is represented by which of the following expressions? Assume represents the market volatility.
- A . 2.326 x x V x
- B . 1.64 x V x /
- C . 1.64 x x V x
- D . 2.326 x V x /
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 default correlation is 25%, what is the one year expected loss on this portfolio?
- A . $1.38m
- B . $11m
- C . $5.26m
- D . $5.5mc
An assumption of normality when returns data have fat tails leads to:
I. underestimation of VaR at high confidence levels
II. overestimation of VaR at low confidence levels
III. overestimation of VaR at high confidence levels
IV. underestimation of VaR at low confidence levels
- A . I and II
- B . I, II, III and IV
- C . I, II and III
- D . II, III and IV
If an institution has $1000 in assets, and $800 in liabilities, what is the economic capital required to avoid insolvency at a 99% level of confidence? The VaR in respect of the assets at 99% confidence over a one year period is $100.
- A . 200
- B . 1000
- C . 100
- D . 1100
The CDS rate on a defaultable bond is approximated by which of the following expressions:
- A . Hazard rate / (1 – Recovery rate)
- B . Loss given default x Default hazard rate
- C . Credit spread x Loss given default
- D . Hazard rate x Recovery rate
Which of the following measures can be used to reduce settlement risks:
- A . escrow arrangements using a central clearing house
- B . increasing the timing differences between the two legs of the transaction
- C . providing for physical delivery instead of netted cash settlements
- D . all of the above
For a FX forward contract, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)
- A . At maturity
- B . Roughly three-quarters of the way towards maturity
- C . Indeterminate from the given information
- D . Right after inception
Which of the following is the most accurate description of EPE (Expected Positive Exposure):
- A . The maximum average credit exposure over a period of time
- B . The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
- C . Weighted average of the future positive expected exposure across a time horizon.
- D . The average of the distribution of positive exposures at a specified future date
If the odds of default are 1:5, what is the probability of default?
- A . 16.67%
- B . 20.00%
- C . 12.00%
- D . 50.00%
Which of the following decisions need to be made as part of laying down a system for calculating VaR:
I. The confidence level and horizon
II. Whether portfolio valuation is based upon a delta-gamma approximation or a full revaluation
III. Whether the VaR is to be disclosed in the quarterly financial statements
IV. Whether a 10 day VaR will be calculated based on 10-day return periods, or for 1-day and scaled to 10 days
- A . I and III
- B . II and IV
- C . I, II and IV
- D . All of the above
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