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Latest 8011 Test Testking | Exam 8011 Book

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Candidates for the PRMIA 8011 Certification Exam are required to have in-depth knowledge and practical skills in credit risk management, including credit underwriting, credit monitoring, exposure management, credit portfolio management, and managing counterparty risk. They must also be able to analyze and implement credit risk strategies that take into account the legal, regulatory, and market factors that affect exposure.

PRMIA 8011 Exam is a comprehensive certification that is highly valued in the financial industry. It is designed to provide professionals with the knowledge and skills needed to manage credit and counterparty risk effectively, and it is recognized by many leading financial institutions around the world. Credit and Counterparty Manager (CCRM) Certificate Exam certification is a testament to the individual's expertise in credit and counterparty risk management.

The Credit and Counterparty Manager (CCRM) Certificate Exam certification is ideal for professionals working in financial institutions, including banks, insurance companies, and asset management firms, who are responsible for managing credit risk, counterparty risk, and credit derivatives. The PRMIA 8011 Certification provides candidates with a comprehensive understanding of these risk management concepts and helps them develop the necessary skills to succeed in their roles. Obtaining this certification sets professionals apart in the financial industry and can further their careers by demonstrating their expertise to potential employers and clients.

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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q70-Q75):

NEW QUESTION # 70
Which of the following is a most complete measure of the liquidity gap facing a firm?

A. Marginal liquidity gap
B. Liquidity at Risk
C. Cumulative liquidity gap
D. Residual liquidity gap

Answer: D

Explanation:
Marginal liquidity gap measures the expected net change in liquidity over, say, a day. It is just equal to the liquidity inflow minus liquidity outflow. The cumulative liquidity gap measures the aggregate change in liquidity from a point in time, in other words it is just the summation of the marginal liquidity gap for each of the days included in the period under consideration. The residual liquidity gap goes one step further and adds available 'opening balance' of liquidity to the cumulative liquidity gap to reveal the days or times when the net liquidity is most at risk.
Liquidity at Risk measures the expected time to survival at a certain confidence level applied to the firm's cash flows - and is not a measure of the liquidity gap.
Therefore Choice 'a' is the correct answer.

NEW QUESTION # 71
Assuming all other factors remain the same, an increase in the volatility of the returns on the assets of a firm causes which of the following outcomes?

A. A decrease in the value of the non-callable debt issued by the firm
B. An increase in the value of the callable debt of the firm
C. An increase in the value of the equity of the firm
D. A decrease in the value of the implicit put in in the debt of the firm

Answer: A

Explanation:
Some parts of this question draw upon contingent claims framework to the value of a firm. According to this framework, the relationship between the debt and equity holders of a firm can be viewed as follows: The equity holders have a call option on the assets of the firm with a strike price equal to the value of the debt, and the debt holders have sold them this call. This is so because should the value of the assets of the firm fall below the value of the debt, the equity holders can walk away by handing over the assets to the debt holders in full extinguishment of their claims. If the value of the firm's assets is greater than the value of debt, the equity holders will exercise their call option. At the same time, it is also possible to view the debtholders as holding an asset and having sold a put on the assets of the firm with a strike price equal to the value of the debt. If the value of the assets of the firm were to fall below the value of the debt, they will end up buying the assets at a price equal to the value of the debt.
An increase in the volatility of returns on the assets of a firm increases the volatility of the assetvalue. This means the likelihood that the asset value will go below the value of the debt of the firm will increase. Callable debt can be considered to be a summation of two separate securities: a regular debt, for which the firm pays interest and receives a principal loan; and a call option that the debt holders have sold to the firm allowing the firm to buy back the debt. In return, the firm pays an implied 'premium' to the debt holders who have agreed to buy the callable debt. Therefore the total payments by the company to callable debt holders is equal to the interest payments plus the premium payment for the option. An increase in asset volatility will increase the value of this option as it is likely that the assets will increase in value, and strengthen the company's credit, and lower its spread at which time it would like to repay the debt and refinance/roll over at the new lower rate. Therefore an increase in volatility will increase the 'premium' demanded by the callable debt holders, thereby increasing the total yield and lowering the value of the callable debt. Therefore Choice 'b' (An increase in the value of the callable debt of the firm) is incorrect.
An increase in asset volatility will decrease the value of the firm as it is now riskier than before (higher standard deviation, same expected returns). Therefore Choice 'a' (An increase in the value of the equity of the firm) is false too.
The value of the implicit put in the debt of the firm will increase and not decrease as the volatility of the underlying assets increases. Therefore Choice 'c' (A decrease in the value of the implicit put in in the debt of the firm) is incorrect too.
Choice 'd' (A decrease in the value of the non-callable debt issued by the firm) is correct because higher asset volatility will increase the riskiness of the company's debt, making the required yield higher and decreasing its value.

NEW QUESTION # 72
For a bank using the advanced measurement approach to measuring operational risk, which of the following brings the greatest 'model risk' to its estimates:

A. Aggregation risk, from selecting an incorrect value of estimated correlations between different operational risk estimates
B. Choice of incorrect parameters for loss severity distributions
C. Insufficient number of simulations when building the loss distribution
D. Choice of an incorrect distribution for loss event frequencies

Answer: A

Explanation:
The greatest model risk when calculating operational risk capital comes from incorrect assumptions about correlations between different operational risks for which standalone risk calculations have been made.
Generally, the correlation can be expected to be positive, and would therefore vary between 0 and 1. These two values determine the 'bounds' between which the total operational risk capital would lie, and these bounds are generally quite far apart. Therefore the total value of the operational risk capital is very sensitive to the value chosen for the correlation, and this is the source of the biggest model risk under the AMA.

NEW QUESTION # 73
Which of the following statements is correct?

A. Market liquidity risks present themselves in the form of higher bid offer spreads
B. Funding liquidity risks present themselves in the form of an adverse market impact on prices from a trade
C. Market liquidity risk is idiosyncratic while funding liquidity risk is not
D. Dynamic simulations of liquidity needs require an assumption of counterparty risk remaining constant

Answer: A

Explanation:
Simulations of liquidity needs can be of various types: historical simulations, where the current positions are subjected to the kind of liquidity shocks experienced in the past; static simulations, where a static view of current positions, counterparty credit position, and the business is considered; and dynamic simulations where all factors are dynamically changed including counterparty credit standing, changes to the current portfolio and behavioural aspects of the business. Choice 'b' is incorrect as dynamic simulations require no such assumptions.
Liquidity risk is often thought of in terms of market liquidity risk and funding liquidity risk. Market liquidity risk relates to the the liquidity for a particular type of asset drying up. For example, during the 2007-2009 crisis a large number of corporate bonds and structured products became extremely illiquid. Market liquidity risk manifests itself in the form of higher bid offer spreads, higher pricde impact, and a reduction in the normal market size (ie, the 'normal' size of a trade for which a dealer quote is valid for). Therefore Choice 'd' is correct. Similarly, Choice 'a' is incorrect as adverse price impact results from market liquidity risk and not funding liquidity risk.
Market liquidity risk applies to the entire market and all its participants. It is not idiosyncratic. Therefore Choice 'c' is incorrect too. Funding liquidity risk on the other hand applies to an individual institution that is under liquidity stress in the sense of not being able to meet its obligations such as margin or collateral calls because of a lack of liquid assets. Thus it is funding liquidity that is idiosyncratic. Market liquidity risk often leads to funding liquidity risks materializing as firms are unable to get to the funds they were relying upon due to assets becoming illiquid.

NEW QUESTION # 74
The key difference between 'top down models' and 'bottom up models' for operational risk assessment is:

A. Top down approaches to operational risk are based upon an analysis of key risk drivers, while bottom up approaches consider causality in risk scenarios.
B. Top down approaches to operational risk calculate the implied operational risk using available data such as income volatility, capital etc; while bottom up approaches use causal factors, risk drivers and other factors to get an aggregated estimate of risk.
C. Bottom up approaches to operational risk are based upon an analysis of key risk drivers, while top down approaches consider causality in risk scenarios.
D. Bottom up approaches to operational risk calculate the implied operational risk using available data such as income volatility, capital etc; while top down approaches use causal factors, risk drivers and other factors to get an aggregated estimate of risk.

Answer: B

Explanation:
Top down approaches rely upon available data such as total capital, income volatility, peer group information etc and attempt to imply the capital attributable to operational risk. They do not consider firm specific scenarios or causal factors. Bottom up approaches on the other hand attempt to determine operational risk capital based upon an identification and quantification of firm specific risks. Bottom up approaches help determine a traditional loss distribution from which capital requirements can be determined at a given level of confidence.
Therefore Choice 'd' is the correct answer.

NEW QUESTION # 75
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