Summer Sale Limited Time 65% Discount Offer - Ends in 0d 00h 00m 00s - Coupon code: ecus65

PRMIA 8009 - Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition

PRMIA 8009 Premium Access     Download Demo    
Page: 1 / 4
Total 110 questions

A VaR model for managing market risk at Barings Bank in London would most likely have:

A.

Alerted senior management to the problems before the major losses occurred

B.

Helped very little as Nick Leeson hid many trades

C.

Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics

D.

Been used if senior management had ever seen it

As LTCM started to have major losses, it compounded its problems by doing what?

A.

Trying to borrow more money from major money centre banks

B.

Issuing Subordinated Debt

C.

Returning capital to the general partners before others

D.

Unwinding its' more liquid trades thereby creating more liquidity risk overall

Taisei Fire and Marine Insurance Co

A.

relied almost entirely on Fortress Re's management team for information on the risks in its portfolio

B.

relied on the information it received from other members of the reinsurance pool to manage its risks

C.

had a full understanding from Fortress Re of the risks in the pool

D.

had a full understanding from other members of the pool of the pool's liabilities

According to the Northern Rock Case Study, what is Forced Insolvency?

A.

The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors

B.

The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)

C.

The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital

D.

The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors

The "normal" credit loss profile of Washington Mutual was increased by which of the following?

A.

The general downturn in the economy of the US

B.

By lowering its own credit underwriting standards

C.

Acquisitions like Long Beach and Providian

D.

Catastrophic losses in its own credit card division

According to PRMIA governance principles, boards and audit committees should …

A.

Review compensation plans to ensure consistency with corporate risk appetite, competitive market conditions, and fiduciary responsibility to shareholders

B.

Collectively assume responsibility of understanding and reporting the effectiveness of the firm risk management infrastructure

C.

Be composed of key business unit representatives

D.

Leave shareholder accountability to senior management who decides strategic direction

A risk manager is asked to analyze the credit risk of a convertible bond. The risk manager has never analyzed convertible bonds, but does have significant expertise in credit risk. The risk manager accepts the assignment, finds a paper on the subject through the PRMIA web site and copies the method used there. The risk manager completes the assignment and delivers a report to his or her direct supervisor and the supervisor is quite pleased.

According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), this was acceptable behavior if the following conditions were met:

I. The risk manager disclosed the lack of knowledge about convertible bonds

II. The methodology employed is disclosed and explained

III. The report was just to be used for analysis and not in practice

IV. The risk manager was sure of his/her understanding of the paper found on the web

A.

I and II

B.

I, II and IV

C.

I, II and III

D.

I only

Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:

A.

The Board of Directors, but only if the Blue Ribbon Panel affirms the change

B.

The Board of Directors and a majority of the Members

C.

The Board of Directors alone

D.

34 of all Members

The sensitivity analysis required under IFRS would have done what for China Aviation Oil?

A.

Provided investors and analysts with insight into the dynamics of value changes, and the sensitivity of fair value to the underlying drivers of interest rates, exchange rates, and commodity prices

B.

Only provided the intrinsic value of its outstanding option positions

C.

Only provided the time value of its outstanding option position

D.

None of the above

Which of the following are PRMIA Governance Principles?

I. Sufficiency of Key Resources and Process

II. State of the Art Risk Management Technology

III. Ongoing Education and Discernment

IV. Sufficiency of Key Competencies

A.

I, II and IV only

B.

I and II only

C.

I, III and IV only

D.

All of these are PRMIA Governance Principles