Online Access Free 8010 Practice Test

All else remaining the same, an increase in the joint probability of default between two obligors causes the default correlation between the two to:

• A.Increase
• B.Cannot be determined from the given information
• C.Decrease
• D.Stay the same

What would be the consequences of a model of economic risk capital calculation that weighs all loans equallyregardless of the credit rating of the counterparty?
I. Create an incentive to lend to the riskiest borrowers
II. Create an incentive to lend to the safest borrowers
III. Overstate economic capital requirements
IV. Understate economic capitalrequirements

• A.I and IV
• B.I only
• C.III only
• D.II and III

Which of the following does not affect the credit risk facing a lender institution?

• A.The degree of geographical or sectoral concentration in the loan book
• B.The state of the economy
• C.Credit ratings of individual borrowers
• D.The applicability or otherwise of mark tomarket accounting to the institution

When compared to a low severity high frequency risk, the operational risk capital requirement for a medium severity medium frequency risk is likely to be:

• A.Zero
• B.Higher
• C.Lower
• D.Unaffected by differences in frequency or severity

When combining separate bottom up estimates of market, credit and operational risk measures, a most conservative economic capital estimate results from which of the following assumptions:

• A.Assuming that the resulting distributions have a correlation between 0 and 1
• B.Assuming that market, credit and operational risk estimates are perfectly positively correlated
• C.Assuming that market, credit and operational risk estimates are perfectly negatively correlated
• D.Assuming that market, credit and operational risk estimates are uncorrelated