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1. Which of the following statements are correct in relation to the financial system just prior to the current financial crisis:
I. The system was robustagainst small random shocks, but not against large scale disturbances to key hubs in the network II. Financial innovation helped reduce the complexity of the financial network III. Knightian uncertainty refers to risk that can be quantified and measured IV. Feedback effects under stress accentuated liquidity problems
A) I, II and IV
B) I and IV
C) III and IV
D) II and III
2. The standalone economic capital estimates for the three business units of a bank are $100, $200 and $150 respectively. What is the combined economic capital for the bank, assuming the risks of the three business units are perfectly correlated?
A) 450
B) 269
C) 21
D) 72500
3. For a FX forward contract, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)
A) At maturity
B) Right after inception
C) Roughlythree-quarters of the way towards maturity
D) Indeterminate from the given information
4. 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
A) II and IV
B) I and III
C) I, III and IV
D) All of the above
5. 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.
A) I and IV
B) II, III and IV
C) All of the above
D) II and III
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: A | Question # 3 Answer: A | Question # 4 Answer: B | Question # 5 Answer: C |
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