Prepare 8010 Question Answers Free Update With 100% Exam Passing Guarantee [Q51-Q69]

NO.51 For a given mean, which distribution would you prefer for frequency modeling where operational risk events are considered dependent, or in other words are seen as clustering together (as opposed to being independent)?

NO.52 Which of the following cannot be used as an internal credit rating model to assess an individual borrower:

NO.53 When modeling severity of operational risk losses using extreme value theory (EVT), practitioners often use which of the following distributions to model loss severity:
I. The ‘Peaks-over-threshold’ (POT) model
II. Generalized Pareto distributions
III. Lognormal mixtures
IV. Generalized hyperbolic distributions

NO.54 Which of the following statements are true:
I. Credit VaR often assumes a one year time horizon, as opposed to a shorter time horizon for market risk as credit activities generally span alonger time period.
II. Credit losses in the banking book should be assessed on the basis of mark-to-market mode as opposed to the default-only mode.
III. The confidence level used in the calculation of credit capital is high when the objective is tomaintain a high credit rating for the institution.
IV. Credit capital calculations for securities with liquid markets and held for proprietary positions should be based on marking positions to market.

NO.55 Under the internal ratings based approach for risk weighted assets, for which of the following parameters must each institution make internal estimates (as opposed to relying upon values determined by a national supervisor):

NO.56 The probability of default of a security over a 1 year period is 3%. What is the probability that it would not have defaulted at theend of four years from now?

NO.57 Which of the following statements are true:
I. Credit risk and counterparty risk are synonymous
II. Counterparty risk is the contingent risk from a counterparty’s default in derivative transactions III. Counterparty risk is the risk of a loan default or the risk from moneys lent directly IV. The exposure at default is difficult to estimate for credit risk as it depends upon market movements

NO.58 Which of the following decisions need to be made as part of laying down a system for calculating VaR:
I. How returns are calculated, eg absoluted returns, log returns or relative/percentage returns II. Whether VaR is calculated based on historical simulation, Monte Carlo, or is computed parametrically III. Whether binary/digital options are included in the portfolio positions IV. How volatility is estimated

NO.59 The probability of default of a security over a 1 year period is 3%. What is the probability that it would have defaulted within 6 months?

NO.60 If a borrower has a default probability of 12% over one year, what is the probability of default over a month?

NO.61 A long position in a creditsensitive bond can be synthetically replicated using:

NO.62 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

NO.63 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

NO.64 Which of the following are ordered correctly in the order of debt seniority in a bankruptcy situation?
I. Equity, Subordinate debt, Senior debt
II. Senior debt, Preferred stock, Equity
III.Secured debt, Accounts payable, Preferred stock
IV. Secured debt, DIP financing, Equity

NO.65 The standalone economic capital estimates for the three uncorrelated business units of a bank are $100, $200 and $150 respectively. Whatis the combined economic capital for the bank?

NO.66 The definition of operational risk per Basel II includes which of the following:
I. Riskof loss resulting from inadequate or failed internal processes, people and systems or from external events II. Legal risk III. Strategic risk IV. Reputational risk

NO.67 When combining separate bottom up estimates of market, credit and operational risk measures, a most conservative economic capital estimate results from which of the following assumptions:

NO.68 Under the CreditPortfolio View approach to credit risk modeling, which of the following best describes the conditional transition matrix:

NO.69 Which of the following statements is true:
I. Confidence levels for economic capital calculations are driven by desired credit ratings II. Loss distributions for operational risk are affected more by theseverity distribution than the frequency distribution III. The Advanced Measurement Approach (AMA) referred to in the Basel II standard is a type of a Loss Distribution Approach (LDA) IV. The loss distribution for operational risk under the LDA (Loss Distribution Approach) is estimated by separately estimating the frequency and severity distributions.