NO.20 When compared to a high severity low frequency risk, the operational risk capital requirement for a low severity high frequency risk is likely to be:

NO.21 The sensitivity (delta) of a portfolio to a single point move in the value of the S&P500 is $100. If the current level of the S&P500 is 2000, and has a one day volatility of 1%, what is the value-at-risk for this portfolio at the 99% confidence and a horizon of 10 days? What is this method of calculating VaR called?

NO.22 Which of the following statements is true:

NO.23 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

NO.24 Which of the following is true for the actuarial approach to credit risk modeling (CreditRisk+):

NO.25 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

NO.26 The generalized Pareto distribution, when used in the context of operational risk, is used to model:

NO.27 A bank extends a loan of $1m to a home buyer to buy a house currently worth $1.5m, with the house serving as the collateral. The volatility of returns (assumed normally distributed) on house prices in that neighborhood is assessed at 10% annually. The expected probability of default of the home buyer is 5%.
What is the probability that the bank will recover less than the principal advanced on this loan; assuming the probability of the home buyer’s default is independent of the value of the house?

NO.28 Which of the following steps are required for computing the total loss distribution for a bank for operational risk once individual UoM level loss distributions have been computed from the underlhying frequency and severity curves:
I. Simulate number of losses based onthe frequency distribution
II. Simulate the dollar value of the losses from the severity distribution III. Simulate random number from the copula used to model dependence between the UoMs IV. Compute dependent losses from aggregate distribution curves

NO.29 Which of the following is closest to the description of a ‘risk functional’?

NO.30 If the annual default hazard rate for a borrower is 10%, what is the probability that there is no default at the end of 5 years?

NO.31 For a 10 year interest rate swap, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)

NO.32 If the odds of default are 1:5, what is the probability of default?

NO.33 Which of the following is not a credit event under ISDA definitions?

NO.34 The unexpected loss for a credit portfolio at a given VaR estimate is definedas:

NO.35 Which of the following carry greater counterparty risk: a forward contract on a 10 year note, or a commercial paper carrying a AA credit rating with identicalmaturity and notional?

NO.36 Which of the following risks and reasons justify the use of scenario analysis in operational riskmodeling:
I. Risks for which no internal loss data is available
II. Risks that are foreseeable but have no precedent, internally or externally III. Risks for which objective assessments can be made by experts IV. Risks that are known to exist, but for which no reliable external or internal losses can be analyzed
V. Reducing the complexity of having to fit statistical models to internal and external loss data VI. Managing the capital estimation process as to produce estimates in line with management’s desired capital buffers.

NO.37 Which of the following will be a loss not covered by operational risk as defined under Basel II?

NO.38 A Bank Holding Company (BHC) is invested in an investment bank and a retail bank. The BHC defaults for certain if either the investment bank or the retail bank defaults. However, the BHC can also default on its own without either the investment bank or the retail bank defaulting. The investment bank and the retail bank’s defaults are independent of each other, with a probability of default of 0.05 each. The BHC’s probability of default is 0.11.
What is the probabilityof default of both the BHC and the investment bank? What is the probability of the BHC’s default provided both the investment bank and the retail bank survive?