QUESTION 80
The largest 10 lossesover a 250 day observation period are as follows. Calculate the expected shortfall at a
98% confidence level:
20m
19m
19m
17m
16m
13m
11m
10m
9m
9m

QUESTION 81
Economic capital under the Earnings Volatility approach is calculated as:

QUESTION 82
Which of the following statements is true:

QUESTION 83
Which of the following statements are true:
I. The three pillars under Basel II are market risk, credit risk and operational risk.
II. Basel II is an improvement over Basel I byincreasing the risk sensitivity of the minimum capital requirements.
III. Basel II encourages disclosure of capital levels and risks

QUESTION 84
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 default correlation is 25%, what is the one year expected loss on this portfolio?

QUESTION 85
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?

QUESTION 86
What would be the correct order of steps to addressing data quality problems in an organization?

QUESTION 87
The 99% 10-day VaR for a bank is $200mm. The average VaR for the past 60 days is $250mm, and the bank specific regulatory multiplier is 3. What is the bank’s basic VaR based market risk capital charge?

QUESTION 88
Which of the following is the most important problem to solve for fitting a severity distribution for operational risk capital:

QUESTION 89
Which of the following statements are true:
I. Capital adequacy implies the ability of a firm to remain a going concern II. Regulatory capital and economic capital are identical as they target the same objectives III. The role of economic capital is to provide a buffer against expected losses IV. Conservative estimates of economic capital are based upon a confidence level of 100%

QUESTION 90
Which loss event type is the failure to timely deliver collateral classified as under the Basel II framework?

QUESTION 91
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?

QUESTION 92
Which of the following statements are true:
I. A transition matrix is the probability of a security migrating from one rating class to another during its lifetime.
II. Marginal default probabilities refer to probabilities of default in a particular period, given survival atthe beginning of that period.
III. Marginal default probabilities will always be greater than the corresponding cumulative default probability.
IV. Loss given default is generally greater when recovery rates are low.

QUESTION 93
Which of the following is a measure of the level of capital that an institution needs to hold in order to maintain a desired credit rating?

QUESTION 94
Which of the following formulae describes CVA (Credit Valuation Adjustment)? All acronyms have their usual meanings (LGD=Loss Given Default, ENE=Expected Negative Exposure, EE=Expected Exposure, PD=Probability of Default, EPE=Expected Positive Exposure, PFE=Potential Future Exposure)

QUESTION 95
Which of the following describes rating transition matrices published by credit rating firms:

QUESTION 96
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):

QUESTION 97
A bank holds a portfolio ofcorporate bonds. Corporate bond spreads widen, resulting in a loss of value for the portfolio. This loss arises due to:

QUESTION 98
For a bank using the advanced measurement approach to measuring operational risk, which of the following brings the greatest ‘model risk’ to its estimates:

QUESTION 99
If F be the face value of a firm’s debt, V the value of its assets and E the market value of equity, then according to the option pricing approach a default on debt occurs when:

QUESTION 100
A corporate bond has a cumulative probability of default equal to 20% in the first year, and 45% in the second year. What is the monthly marginal probability of default for the bond in the second year, conditional on there beingno default in the first year?

QUESTION 101
A cumulative accuracy plot:

QUESTION 102
Which of the following is not a tool available to financial institutions for managing credit risk: