Online Access Free 8011 Practice Test

Loss provisioning is intended to cover:

• A.Expected losses
• B.Losses in excess of unexpected losses
• C.Both expected and unexpected losses
• D.Unexpected losses

Which of the following statements is true:
I. Confidence levels for economic capital calculations are driven by desired credit ratings II. Loss distributions for operational risk are affected more by the severity distribution than the frequency distribution III. The Advanced Measurement Approach (AMA) referred to in the Basel II standard is a type of a Loss Distribution Approach (LDA) IV. The loss distribution for operational risk under the LDA (Loss Distribution Approach) is estimated by separately estimating the frequency and severity distributions.

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

Which of the following will be a loss not covered by operational risk as defined under Basel II?

• A.Fat finger losses
• B.Strategic planning
• C.Earthquakes
• D.Systems failure

The accuracy of a VaR estimate based on a Monte carlo simulation of portfolio prices is affected by:
I). The shape of the distribution of portfolio values
II). The number simulations carried out
III). The confidence level selected for the VaR estimate

• A.II and III
• B.III
• C.II
• D.I, II and III

A bank prices retail credit loans based on median default rates. Over the long run, it can expect:

• A.Correct pricing of risk in the retail credit portfolio
• B.Underestimation and therefore underpricing of risk in it retail portfolio
• C.A reduction in the rate of defaults
• D.Overestimation of risk and overpricing, leading to loss of market share