Question 1

In which of the New Initiative Risk Assessment Process (NIRAP) business case topics would you most likely find an analysis of project costs and funding arrangements?

Options :

A : Commercial aspects.

B : Expected benefits.

C : Initial stage.

D : Alternatives.

Answer: A

Question 2

If one of the entities in the CDX NA IG index defaults, the CDS index would most likely:

Options :

A : continue with 124 entities, and the notional principal of each entity would remain the same.

B : continue with a replacement entity, with no change to the notional principal.

C : continue with 99 entities, and the notional principal of each entity would be reduced by 1%.

D : make a payoff and be discontinued.

Answer: A

Question 3

The structural model of credit risk is most likely a(n):

Options :

A : heterogenous model.

B : dynamic model.

C : random recovery rate model.

D : implied copula model.

Answer: B

Question 4

A large bank is reviewing its processes and procedures to manage operational risk in accordance with best practices established by the Basel Committee. In implementing the three lines of defense model, which of the following statements is correct?

Options :

A : The corporate operational risk function, as part of the second line of defense, should challenge risk inputs from business line managers.

B : The internal audit function should serve as the first line of defense and continually validate operational procedures used by the business lines.

C : The corporate operational risk function should serve as the third line of defense and validate model assumptions made by senior management.

D : Business line managers, as part of the first line of defense, should provide a credible challenge to the internal audit function.

Answer: A

Question 5

A group of risk managers in a newly established asset management firm is assignedto implement the risk management process that includes three fundamentaldimensions: risk planning, risk budgeting and risk monitoring. The managers startby discussing the components of and the guidelines included in the risk plan. Whichof the following statements is correct?

Options :

A : on risk capital for each allocation taken independently.

B : that can cause aspects of the risk plan to fail.

C : be included in its strategic plan.

D : organization’s key dependencies on these goals.

Answer: B

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