Guaranteed Success with PRMIA 8011 Dumps

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PRMIA 8011 CCRM certificate is designed for professionals who are involved in credit risk management and counterparty risk management. Credit and Counterparty Manager (CCRM) Certificate Exam certification program covers a wide range of topics, including credit analysis, credit risk measurement and management, counterparty risk management, credit derivatives, and regulatory requirements related to credit risk. By earning the PRMIA 8011 CCRM certificate, individuals can demonstrate their expertise in these critical areas and enhance their career prospects in the risk management field.

PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q118-Q123):

NEW QUESTION # 118
Which of the following is true for the actuarial approach to credit risk modeling (CreditRisk+):

A. The approach considers only default risk, and ignores the risk to portfolio value from credit downgrades
B. Default correlations between obligors are accounted for using a multivariate normal model
C. The approach is based upon historical rating transition matrices
D. The number of defaults is modeled using a binomial distribution where the number of defaults are considered discrete events

Answer: A

Explanation:
The actuarial model considers defaults to follow a Poisson distribution with a given mean per period, and these are binary in nature, ie a default happens or it does not happen. The model does not consider the loss of value from credit downgrades, and focuses only on defaults. The model also does not consider default correlations between obligors. Therefore Choice 'c' is the correct answer.
The other choices are not true statements that would apply to the actuarial approach.

NEW QUESTION # 119
There are three bonds in a diversified bond portfolio, whose default probabilities are independent of each other and equal to 1%, 2% and 3% respectively over a 1 year time horizon. Calculate the probability that exactly 1 of the three bonds will default.

A. 2%
B. 0%
C. 5.8%
D. .011%

Answer: C

Explanation:
The probability that only one of the three bonds will default is equal to the sum of the probabilities of the three scenarios where one bond defaults and the other two survive. This probability is given by 1%*(1 - 2%)* (1 - 3%) + (1 - 1%)*2%*(1 - 3%) + (1 - 1%)*(1 - 2%)*3% = 5.7818%. Choice 'c' is the correct answer.

NEW QUESTION # 120
Which of the following credit risk models relies upon the analysis of credit rating migrations to assess credit risk?

A. KMV's EDF based approach
B. The CreditMetrics approach
C. The contingent claims approach
D. The actuarial approach

Answer: B

Explanation:
The correct answer is Choice 'b'. The following is a brief description of the major approaches available to model credit risk, and the analysis that underlies them:
1. CreditMetrics: based on the credit migration framework. Considers the probability of migration to other credit ratings and the impact of such migrations on portfolio value.
2. CreditPortfolio View: similar to CreditMetrics, but adds the impact of the business cycle to the evaluation.
3. The contingent claims approach: uses option theory by considering a debt as a put option on the assets of the firm.
4. KMV's EDF (expected default frequency) based approach: relies on EDFs and distance to default as a measure of credit risk.
5. CreditRisk+: Also called the 'actuarial approach', considers default as a binary event that either happens or does not happen. This approach does not consider the loss of value from deterioration in credit quality (unless the deterioration implies default).

NEW QUESTION # 121
If an institution has $1000 in assets, and $800 in liabilities, what is the economic capital required to avoid insolvency at a 99% level of confidence? The VaR in respect of the assets at 99% confidence over a one year period is $100.

A. 0
B. 1
C. 2
D. 3

Answer: A

Explanation:
The economic capital required to avoid insolvency is just the asset VaR, ie $100. This means that if the worst case losses are realized, the institution would need to have a buffer equivalent to those losses which in this case will be $100, and this buffer is the economic capital.
The actual value of liabilities is not relevant as they are considered 'riskless' from the institution's point of view, ie they will be taken at full value. In this particular case, the institution has $200 in capital which is more than the economic capital required.
Therefore Choice 'c' is the correct answer.

NEW QUESTION # 122
Which of the following statements are true:
I. Liquidity risks during time of crisis may be exacerbated by large collateral calls continuing over a period of time.
II. Stress tests are always separately modeled from VaR computations which cannot deal with stress scenarios of the kind considered in stress tests.
III. A maximum loss scenario considers the maximum possible loss given a 'plausibility constraint' that is based upon the joint probability of such a loss happening

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

Answer: C

Explanation:
If VaR is calculated based upon historical simulations, and these simulations are designed as to include all stress scenarios of interest, then VaR and stress tests can be a part of an integrated risk measurement system.
Therefore it is not correct to say that stress tests are always separately modeled from VaR and II is false. I and III are true, and therefore Choice 'd' is the correct answer.

NEW QUESTION # 123
......

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Guaranteed Success with PRMIA 8011 Dumps

New PRMIA 8011 Test Voucher - New 8011 Exam Notes

PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q118-Q123):

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