Question 1

Which one of the following four statements presents a challenge of using external lossdatabases in the operational risk framework?

Options :

A : Use of benchmarked data reflects similar data collection standards.

B : External events are usually not of interest to senior management.

C : If the external data is gathered from news sources, it may only reflect events that areinteresting to the press.

D : They provide a source of data on what operational loss events will occur.

Answer: C

Question 2

A bank customer can use either a plain vanilla option or an option contract with volumetric

flexibility to reduce the following risks:

I. Market Risk

II. Basis Risk

III. Operational Risk

Options :

A : I

B : II

C : I, II

D : II, III

Answer: C

Question 3

Which one of the four following statements about Basis point values is correct?Basis point value:

Options :

A : Is a widely used statistical tool used to measure market risk.

B : Refers to the change in the value of a fixed income position for a very small changeyields.

C : Is a risk sensitivity measure used to measure the point spread risk in the banking book.

D : Provides a quick estimate of the sensitivity of the bank-s banking book, to increasingvolatility in interest rates.

Answer: B

Question 4

Returns on two assets show very strong positive linear relationship. Their correlation

should be closest to which of the following choices?

Options :

A : 15%

B : 45%

C : 60%

D : 100%

Answer: D

Question 5

What is a common implicit assumption that is made when computing VaR using parametric

methods?

Options :

A : The expected returns are constant, but the standard deviation changes over time.

B : The standard deviations of returns are constant, but the mean changes over time.

C : The mean of and the standard deviations of returns are both constant.

D : The mean and standard deviation of returns change periodically in response to crises.

Answer: C

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