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| Section | Objectives |
|---|---|
| Topic 1: Classic Credit Risk | - Credit products and lifecycle
|
| Topic 2: Counterparty Risk | - Mitigation techniques (netting, collateral) - Definition and sources of counterparty risk |
| Topic 3: Credit Portfolio Management | - Portfolio credit risk measurement - Risk concentration and diversification |
| Topic 4: SA-CCR and Regulatory Frameworks | - Standardized Approach for Counterparty Credit Risk |
| Topic 5: Modern Credit Risk Modeling | - PD/LGD modeling frameworks - Credit VaR and loss distribution simulation |
| Topic 6: CVA and DVA | - Measurement and interpretation - Valuation adjustments |
| Topic 7: Credit Derivatives and Securitization | - Securitization structures and process - Credit derivatives instruments |
If the full notional value of a debt portfolio is $100m, its expected value in a year is $85m, and the worst value of the portfolio in one year's time at 99% confidence level is $60m, then what is the credit VaR?
Correct Answer: D 🗳️
Explanation: Only visible for ITExamSimulator members. You can sign-up / login (it's free).
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.
Correct Answer: C 🗳️
Explanation: Only visible for ITExamSimulator members. You can sign-up / login (it's free).
Which of the following is true in relation to the application of Extreme Value Theory when applied to operational risk measurement?
I. EVT focuses on extreme losses that are generally not covered by standard distribution assumptions II. EVT considers the distribution of losses in the tails III. The Peaks-over-thresholds (POT) and the generalized Pareto distributions are used to model extreme value distributions IV. EVT is concerned with average losses beyond a given level of confidence
Correct Answer: A 🗳️
Explanation: Only visible for ITExamSimulator members. You can sign-up / login (it's free).
The daily VaR of an investor's commodity position is $10m. The annual VaR, assuming daily returns are independent, is ~$158m (using the square root of time rule). Which of the following statements are correct?
I. If daily returns are not independent and show mean-reversion, the actual annual VaR will be higher than
$158m.
II. If daily returns are not independent and show mean-reversion, the actual annual VaR will be lower than
$158m.
III. If daily returns are not independent and exhibit trending (autocorrelation), the actual annual VaR will be higher than $158m.
III. If daily returns are not independent and exhibit trending (autocorrelation), the actual annual VaR will be lower than $158m.
Correct Answer: A 🗳️
Explanation: Only visible for ITExamSimulator members. You can sign-up / login (it's free).
The generalized Pareto distribution, when used in the context of operational risk, is used to model:
Correct Answer: B 🗳️
Explanation: Only visible for ITExamSimulator members. You can sign-up / login (it's free).
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