Q55. Under the credit migration approach to assessing portfolio credit risk, which of the following are needed to generate adistribution of future portfolio values?

Q56. Which of the following is closest to the description of a ‘risk functional’?

Q57. Which of the following data sources are expected to influence operational risk capital under the AMA:
I. Internal Loss Data (ILD)
II. External Loss Data (ELD)
III. Scenario Data (SD)
IV. Business Environment and Internal Control Factors (BEICF)

Q58. Which of the following are considered properties of a ‘coherent’ risk measure:
I. Monotonicity
II. Homogeneity
III. Translation Invariance
IV. Sub-additivity

Q59. The Basel framework does not permit which of the following Units of Measure (UoM) for operational risk modeling:
I. UoM based on legal entity
II. UoM based on event type
III. UoM based on geography
IV. UoM based on line of business

Q60. Pick underlying risk factors for a position in an equity index option:
I. Spot value for the index
II. Risk free interest rate
III. Volatility of the underlying
IV. Strike price for the option

Q61. Which of the following is a cause ofmodel risk in risk management?

Q62. What would be the correct order of steps to addressing data quality problems in an organization?

Q63. The VaR of a portfolio at the 99% confidence level is $250,000 when mean return is assumed to be zero. If the assumption of zero returns is changed to an assumption of returns of $10,000, what is the revised VaR?

Q64. Which of the following statements are true:
I. Heavy tailed parametricdistributions are a good choice for severity modeling in operational risk.
II. Heavy tailed body-tail distributions are a good choice for severity modeling in operational risk.
III. Log-likelihood is a means to estimate parameters for a distribution.
IV. Body-tail distributions allow modeling small losses differently from large ones.

Q65. 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

Q66. The Altman credit risk score considers:

Q67. When building a operational loss distribution by combining a loss frequency distribution and a loss severity distribution, it is assumed that:
I. The severity of losses is conditional upon the numberof loss events
II. The frequency of losses is independent from the severity of the losses III. Both the frequency and severity of loss events are dependent upon the state of internal controls in the bank

Q68. For a group of assets known to be positively correlated, what is the impact on economic capital calculations if we assume the assets to be independent (or uncorrelated)?

Q69. Which of the following was not a policy response introduced by Basel 2.5 in response to the global financial crisis:

Q70. Which of the following formulae correctly describes Component VaR. (p refers to the portfolio, and i is the i-th constituent of the portfolio. MVaR means Marginal VaR, and other symbols have their usual meanings.)

Q71. The CDS quote for the bonds of Bank X is 200 bps. Assuming a recovery rate of 40%, calculate the default hazard rate priced in the CDS quote.

Q72. A bank’s detailed portfolio data on positions held in a particular security across the bank does not agree with the aggregate total position for that security for the bank. What data quality attribute is missing in this situation?

Q73. A portfolio has two loans, A and B, each worth $1m. The probability of default of loan A is 10% and that of loan B is 15%. Theprobability of both loans defaulting together is 1%. Calculate the expected loss on the portfolio.

Q74. Which of the following statements are true:
I.Top down approaches help focus management attention on the frequency and severity of loss events, while bottom up approaches do not.
II. Top down approaches rely upon high level data while bottom up approaches need firm specific risk data to estimate risk.
III. Scenario analysis can help capture both qualitative and quantitative dimensions of operational risk.

Q75. CreditRisk+, the actuarial model for calculating portfolio credit risk, is based upon: