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PRMIA PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition Sample Questions:
1. The standalone economic capital estimates for the three uncorrelated business units of a bank are $100, $200 and $150 respectively. What is the combined economic capital for the bank?
A) 21
B) 450
C) 72500
D) 269
2. Consider a portfolio with a large number of uncorrelated assets, each carrying an equal weight in the portfolio.
Which of the following statements accurately describes the volatility of the portfolio?
A) The volatility of the portfolio will be equal to the square root of the sum of the variances of the assets in the portfolio weighted by the square of their weights
B) The volatility of the portfolio will be equal to the weighted average of the volatility of the assets in the portfolio
C) The volatility of the portfolio will be close to zero
D) The volatility of the portfolio is the same as that of the market
3. Which of the following is not a measure of risk sensitivity of some kind?
A) PL01
B) Delta
C) CR01
D) Convexity
4. Credit exposure for derivatives is measured using
A) Standard normal distribution
B) Forward looking exposure profile of the derivative
C) Notional value of the derivative
D) Current replacement value
5. 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.
A) I and III
B) I and IV
C) II and III
D) II and IV
Solutions:
Question # 1 Answer: D | Question # 2 Answer: A | Question # 3 Answer: A | Question # 4 Answer: B | Question # 5 Answer: C |