EXAM 8011 EXPERIENCE, EXAM 8011 CRAM

Exam 8011 Experience, Exam 8011 Cram

Exam 8011 Experience, Exam 8011 Cram

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Revised and updated according to the syllabus changes and all the latest developments in theory and practice, our Credit and Counterparty Manager (CCRM) Certificate Exam dumps are highly relevant to what you actually need to get through the certifications tests. Moreover they impart you information in the format of 8011 Questions and answers that is actually the format of your real certification test. Hence not only you get the required knowledge but also find the opportunity to practice real exam scenario. For consolidation of your learning, our Credit and Counterparty Manager (CCRM) Certificate Exam dumps PDF file also provide you sets of practice questions and answers. Doing them again and again, you enrich your knowledge and maximize chances of an outstanding exam success.

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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q167-Q172):

NEW QUESTION # 167
If the full notional value of a debt portfolio is $100m, its expected value in a year is $85m, and the worst value of the portfolio in one year's time at 99% confidence level is $60m, then what is the credit VaR?

  • A. $60m
  • B. $40m
  • C. $25m
  • D. $15m

Answer: C

Explanation:
Credit VaR is the difference between the expected value of the portfolio and the value of the portfolio at the given confidence level. Therefore the credit VaR is $85m - $ 60m = $25m. Choice 'b' is the correct answer.
Note that economic capital and credit VaR are identical at a risk horizon of one year. Therefore if the question asks for economic capital, the answer would be the same.
[Again, an alternative way to look at this is to consider the explanation given in III.B.6.2.2: Credit Var = Q(L)
- EL where Q(L) is the total loss at a given confidence interval, and EL is the expected loss. In this case Q(L)
- $100-$60 = $40, and EL = $100-$85=$15. Therefore Credit VaR = $40-$15=$25.]


NEW QUESTION # 168
For an option position with a delta of 0.3, calculate VaR if the VaR of the underlying is $100.

  • A. 0
  • B. 1
  • C. 2
  • D. 33.33

Answer: C

Explanation:
The first order approximation of the VaR of an option position is nothing but the VaR of the underlying multiplied by the option's delta. This is intuitive because the delta is the sensitivity of the option price to changes in the prices of the underlying, and in this case since the delta is 0.3 and the underlying's VaR is
$100, the VaR of the options position is 0.3 x $100 = $30. Therefore Choice 'c' is the correct answer.
(Note that the second order approximation of the VaR of an options position considers the option gamma too, and VaR reduces if gamma increases.)


NEW QUESTION # 169
A Bank Holding Company (BHC) is invested in an investment bank and a retail bank. The BHC defaults for certain if either the investment bank or the retail bank defaults. However, the BHC can also default on its own without either the investment bank or the retail bank defaulting. The investment bank and the retail bank's defaults are independent of each other, with a probability of default of 0.05 each. The BHC's probability of default is 0.11.
What is the probability of default of both the BHC and the investment bank? What is the probability of the BHC's default provided both the investment bank and the retail bank survive?

  • A. 0.0475 and 0.10
  • B. 0.05 and 0.0125
  • C. 0.11 and 0
  • D. 0.08 and 0.0475

Answer: B

Explanation:
Since the BHC always fails when the investment bank fails, the joint probability of default of the two is merely the probability of the investment bank failing, ie 0.05.
The probability of just the BHC failing, given that both the investment bank and the retail bank have survived will be equal to 0.11 - (0.05+0.05-0.05*0.05) = 0.0125. (The easiest way to understand this would be to consider a venn diagram, where the area under the largest circle is 0.11, and there are two intersecting circles inside this larger circle, each with an area of 0.05 and their intersection accounting for 0.05*0.05. We need to calculate the area outside of the two smaller circles, but within the larger circle representing the BHC).
Refer diagram below, please excuse the awful colors.
A diagram of a bank Description automatically generated


NEW QUESTION # 170
When performing portfolio stress tests using hypothetical scenarios, which of the following is not generally a challenge for the risk manager?

  • A. Considering back office capacity to deal with increased transaction volumes
  • B. Building a consistent set of hypothetical shocks to individual risk factors
  • C. Building a positive semi-definite covariance matrix
  • D. Evaluating interrelationships between counterparties when considering liquidity risks

Answer: A

Explanation:
Choice 'c' relates to operational risk and process capabilities, generally not a concern when evaluating market risk of a portfolio. Choice 'a', Choice 'b' and Choice 'd' represent real concerns for the risk manager when building stress tests for the value of a portfolio.
Choice 'a' is relevant because certain shocks may be inconsistent with each other, and thereforeimplausible.
For example, an increase in futures prices may be inconsistent with without spot prices and/or interest rates increasing according to the no-arbitrage condition. Choice 'b' is relevant when modeling a covariance matrix in a stressed situation with higher correlations, as a hypothetical covariance matrix which is not positive semi- definite may give absurd results (negative variance). Choice 'd' is relevant as liquidity risks may affect the price that can be realized for positions held.


NEW QUESTION # 171
A bank holds a portfolio of corporate bonds. Corporate bond spreads widen, resulting in a loss of value for the portfolio. This loss arises due to:

  • A. Market risk
  • B. Credit risk
  • C. Liquidity risk
  • D. Counterparty risk

Answer: A

Explanation:
The difference between the yields on corporate bonds and the risk free rate is called the corporate bond spread. Widening of the spread means that corporate bonds yield more, and their yield curve shifts upwards, driving down bond prices. The increase in the spread is a consequence of the market risk from holding these interest rate instruments, which is a part of market risk. If the reduction in the value of the portfolio were to be caused by a change in the credit rating of the bonds held, it would have been a loss arising due to credit risk.
Counterparty risk and liquidity risk are not relevant for this question. Therefore Choice 'c' is the correct answer.


NEW QUESTION # 172
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