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| Section | Objectives |
|---|---|
| Counterparty Risk | - Derivatives credit risk considerations - Netting and collateral management - Counterparty credit exposure |
| Credit Risk | - Credit portfolio risk - Credit risk measurement and modeling
|
| Asset-Liability Management (ALM) | - Interest rate risk in the banking book (IRRBB) - Liquidity risk management |
| Risk Management Frameworks | - Enterprise risk management principles
|
| Market Risk | - Interest rate, equity, FX, and commodity risk - Market risk measurement techniques
|
| Funds Transfer Pricing (FTP) | - Internal pricing of funds and liquidity allocation - FTP methodologies |
| Operational Risk | - Operational risk types and sources - Operational risk management techniques
|
1. All else remaining the same, an increase in the joint probability of default between two obligors causes the default correlation between the two to:
A) Cannot be determined from the given information
B) Decrease
C) Stay the same
D) Increase
2. 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:
A) Execution delivery and system failure
B) External fraud
C) Third party fraud
D) Internal fraud
3. What is the 1-day VaR at the 99% confidence interval for a cash flow of $10m due in 6 months time? The risk free interest rate is 5% per annum and its annual volatility is 15%. Assume a 250 day year.
A) 85123
B) 1744500
C) 109031
D) 5500
4. Which of the following statements is true in relation to collateral management?
I. A collateral management system need not consider the failure by counterparties to return collateral when due II. The extent to which counterparties may have rehypothecated collateral is not a consideration for a collateral management system III. Cash is an acceptable substitute for any type of collateral required to be posted IV. Haircuts do not apply to treasury issued instruments posted as collateral
A) I, II and III
B) None of the statements is true
C) II and III
D) I, II, III and IV
5. Changes in which of the following do not affect the expected default frequencies (EDF) under the KMV Moody's approach to credit risk?
A) Changes in the debt level
B) Changes in the firm's market capitalization
C) Changes in the risk free rate
D) Changes in asset volatility
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: B | Question # 3 Answer: D | Question # 4 Answer: B | Question # 5 Answer: C |
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