Q93. Under the standardized approach to determining operational risk capital, operations risk capital is equal to:

Q94. The probability of default of a security during the first year after issuance is 3%, that during the second and third years is 4%, and during the fourth year is 5%. What is the probability that it would not have defaulted at the end of four years from now?

Q95. Which of the following formulae describes Marginal VaR for a portfolio p, where V_i is the value of the i-th asset in the portfolio? (All other notation and symbols have their usual meaning.) A)

B)

C)

D)
All of the above

Q96. Which of the following statements are correct?
I. A reliance upon conditional probabilities and a-priori views of probabilities is called the ‘frequentist’ view II. Knightian uncertainty refers to thingsthat might happen but for which probabilities cannot be evaluated III. Risk mitigation and risk elimination are approaches to reacting to identified risks IV. Confidence accounting is a reference to the accounting frauds that were seen in the past decadeas a reflection of failed governance processes

Q97. For a loan portfolio, unexpected losses are charged against:

Q98. Under the KMV Moody’s approach to credit risk measurement, how is the distance to default converted to expected default frequencies?

Q99. Under the internal ratings based approach for risk weighted assets, for which of the following parameters must each institution make internal estimates (as opposed to relying upon values determined by a national supervisor):

Q100. Which of the following was not a policy response introduced by Basel 2.5 in response to the global financial crisis:

Q101. Altman’s Z-score does not consider which of the following ratios:

Q102. Which of the following can be used to reduce credit exposures to a counterparty:
I. Netting arrangements
II. Collateral requirements
III. Offsetting tradeswith other counterparties
IV. Credit default swaps

Q103. Loss provisioning is intended to cover:

Q104. Which of the following best describes a ‘break clause ?

Q105. If X represents a matrix with ratings transition probabilities for one year, the transition probabilities for 3 years are given by the matrix:

Q106. If the odds of default are 1:5, what is the probability of default?

Q107. Which of the following is the best description of the spread premium puzzle:

Q108. Which of the following decisions need to be made as part of laying down a system for calculating VaR:
I. The confidence level and horizon
II. Whether portfolio valuation is based upon a delta-gamma approximation or a full revaluation III. Whether the VaR is to be disclosed in the quarterly financial statements IV. Whether a 10 day VaR will be calculated based on 10-day return periods, or for 1-day and scaled to 10 days

Q109. According to Basel II’s definition of operational loss event types, losses due to acts by third parties intended to defraud, misappropriate property or circumvent the law are classified as:

Q110. As opposed to traditional accounting based measures, risk adjusted performance measures use which of the following approaches to measure performance:

Q111. Whichof the following statements are true in relation to Historical Simulation VaR?
I. Historical Simulation VaR assumes returns are normally distributed but have fat tails II. It uses full revaluation, as opposed to delta or delta-gamma approximations III. Acorrelation matrix is constructed using historical scenarios IV. It particularly suits new products that may not have a long time series of historical data available

Q112. There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the two?

Q113. Which of the beloware a way to classify risk governance structures: