Free 8011 Questions for PRMIA Credit and Counterparty Manager (CCRM) Certificate 8011 Exam as PDF & Practice Test Engine

Which of the following are true:
I. Delta hedges need to be rebalanced frequently as deltas fluctuate with fluctuating prices.
II. Portfolio managers are right to focus on primary risks over secondary risks.
III. Increasing the hedge rebalance frequency reduces residual risks but increases transaction costs.
IV. Vega risk can be hedged using options.

Random recovery rates in respect of credit risk can be modeled using:

The risk that a counterparty fails to deliver its obligation upon settlement while having received the leg owed to it is called:

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?

Which of the following statements are true:
I. It is usual to set a very high confidence level when estimating VaR for capital requirements.
II. For model validation, very high VaR confidence levels are used to minimize excess losses.
III. For limit setting for managing day to day positions, it is usual to set VaR confidence levels that are neither too low to be exceeded too often, nor too high as to be never exceeded.
IV. The Basel accord requirements for market risk capital require the use of a time horizon of 1 year.

Which of the following statements are true in relation to Principal Component Analysis (PCA) as applied to a system of term structures?
I. The factor weights on the first principal component will show whether there is common trend in the system II. The factors to be applied to principal components are obtained from eigenvectors of the correlation matrix III. PCA is a standard method for reducing dimensionality in data when considering a large number of correlated variables IV. The smallest absolute eigenvalues and their associated eigenvectors are the most useful for explaining most of the variation

If the systematic VaR for an equity portfolio is $100 and the specific VaR is $80, then which of the following is true in relation to the total VaR:

Which of the following statements is true?

Financial institutions need to take volatility clustering into account:
I. To avoid taking on an undesirable level of risk
II. To know the right level of capital they need to hold
III. To meet regulatory requirements
IV. To account for mean reversion in returns

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

Which of the following cannot be used to address the issue of heavy tails when modeling market returns

What is the 1-day VaR at the 99% confidence interval for a cash flow of $10m due in 6 months time? The risk free interest rate is 5% per annum and its annual volatility is 15%. Assume a 250 day year.