8010 Practice Exam Questions and Answers

Under the CreditPortfolio View model of credit risk, the conditional probability of default will be:

A bank expects the error rate in transaction data entry for a particular business process to be 0.005%. What is the range of expected errors in a day within +/- 2 standard deviations if there are 2,000,000 such transactions each day?

Which of the following is NOT true in respect of bilateral close out netting:

Credit exposure for derivatives is measured using

If E denotes the expected value of a loan portfolio at the end on one year and U the value of the portfolio in the worst case scenario at the 99% confidence level, which of the following expressions correctly describes economic capital requiredin respect of credit risk?

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

Which of the following statements is true

I. If no loss data is available, good quality scenarios can be used to model operational risk

II. Scenario data can be mixed with observed loss data for modeling severity and frequency estimates

III. Severity estimates should not be created by fitting models to scenario generated loss data points alone

IV. Scenario assessments should only be used as modifiers to ILD or ELD severity models.

According to the implied capital model, operational risk capital is estimated as:

Financial institutions need to take volatility clustering into account:

I. To avoid taking on an undesirable level of risk

II. To know the right level of capital they need to hold

III. To meet regulatory requirements

IV. To account for mean reversion in returns

A bank prices retail credit loans based on median default rates. Over the long run, it can expect: