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PRMIA 8010 - Operational Risk Manager (ORM) Exam

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Total 240 questions

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 toanother over a one year period

Which of the following credit risk models includes a consideration of macro economic variables such asunemployment, balance of payments etc to assess credit risk?

A.

KMV's EDF based approach

B.

The CreditMetrics approach

C.

The actuarial approach

D.

CreditPortfolio View

Which of the following is a cause ofmodel risk in risk management?

A.

Programming errors

B.

Misspecification of the model

C.

Incorrect parameter estimation

D.

All of the above

Which of the following objectives are targeted by rating agencies when assigning ratings:

I. Ratings accuracy

II. Ratings stability

III. High accuracy ratio (AR)

IV. Ranked ratings

A.

II and III

B.

III and IV

C.

I and II

D.

I, II and III

Which of the following represents a riskier exposure for a bank: A LIBOR based loan, or an Overnight Indexed Swap? Which of the two rates is expected to be higher?

Assume the same counterparty and the same notional.

A.

A LIBOR based loan; OIS rate will be higher

B.

Overnight Index Swap; LIBOR rate will be higher

C.

A LIBOR based loan; LIBOR rate will be higher

D.

Overnight Index Swap; OIS rate will be higher

When compared to a medium severity medium frequency risk, the operational risk capital requirement for a high severity very low frequency risk is likely to be:

A.

Higher

B.

Lower

C.

Zero

D.

Unaffected by differences in frequency or severity

The loss severity distribution for operational risk loss events is generally modeled by which of the following distributions:

I. the lognormal distribution

II. The gamma density function

III. Generalized hyperbolic distributions

IV. Lognormal mixtures

A.

II and III

B.

I, II and III

C.

I, II, III and IV

D.

I and III

Which of the following are valid approaches to leveraging external loss data for modeling operational risks:

I. Both internal and external losses can be fitted with distributions,and a weighted average approach using these distributions is relied upon for capital calculations.

II. External loss data is used to inform scenario modeling.

III. External loss data is combined with internal loss data points, and distributions fitted to the combined data set.

IV. External loss data is used to replace internal loss data points to create a higher quality data set to fit distributions.

A.

I, II and III

B.

I and III

C.

II and IV

D.

All of the above

The capital adequacy ratio applied to risk weighted assets for the calculation of capital requirements for credit risk per Basel II is:

A.

150%

B.

12.5%

C.

100%

D.

8%

For a loan portfolio, unexpected losses are charged against:

A.

Credit reserves

B.

Economic credit capital

C.

Economic capital

D.

Regulatory capital