PRMIA 8010 - Operational Risk Manager (ORM) Exam
The cumulative probability of default for a security for 4 years is 11.47%. The marginal probability of default for the security for year 5 is 5% during year 5. What is the cumulative probability of default for the security for 5 years?
Which of the following measures can be used to reduce settlement risks:
Which of the following statements is true:
I. Recovery rate assumptions can be easily made fairly accurately given past data available from credit rating agencies.
II. Recovery rate assumptions are difficult to make given the effect of the business cycle, nature of the industry and multiple other factors difficult to model.
III. The standard deviation of observed recovery rates is generally very high, making any estimate likely to differ significantly from realized recovery rates.
IV. Estimation errors for recovery rates are not a concern as they are not directionally biased and will cancel each other out over time.
Which of the following belong in a credit risk report?
Which of the following is the most important problem to solve for fitting a severity distribution for operational risk capital:
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)?
Which of the following cannot be used as an internal credit rating model to assess an individual borrower:
There are three bonds in a diversified bond portfolio, whose default probabilities are independent of each other and equal to 1%, 2% and 3% respectively over a 1 year time horizon. Calculate the probability that none of the three bonds will default.
A stock that follows the Weiner process has its future price determined by:
Which of the following statements are correct:
I. A training set is a set of data used to create a model, while a control set is a set of data is used to prove that the model actually works
II. Cleansing, aggregating or ensuring data integrity is a task for the IT department, and is not a risk manager's responsibility
III. Lack of information on the quality of underlying securities and assets was a major cause of the collapse in the CDO markets during the credit crisis that started in 2007
IV. The problem of lack of historical data can be addressed reasonably satisfactorily by using analytical approaches