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| Section | Objectives |
|---|---|
| Topic 1: Modern Credit Risk Modeling | - PD/LGD modeling frameworks - Credit VaR and loss distribution simulation |
| Topic 2: Counterparty Risk | - Mitigation techniques (netting, collateral) - Definition and sources of counterparty risk |
| Topic 3: Credit Portfolio Management | - Risk concentration and diversification - Portfolio credit risk measurement |
| Topic 4: SA-CCR and Regulatory Frameworks | - Standardized Approach for Counterparty Credit Risk |
| Topic 5: Credit Derivatives and Securitization | - Securitization structures and process - Credit derivatives instruments |
| Topic 6: Classic Credit Risk | - Credit risk methodology
|
| Topic 7: CVA and DVA | - Valuation adjustments - Measurement and interpretation |
1. Under the basic indicator approach to determining operational risk capital, operational risk capital is equal to:
A) 15% of the average net income (considering only the positive years) of the past three years
B) 15% of the average gross income of the past five years
C) 25% of the average gross income (considering only the positive years) of the past three years
D) 15% of the average gross income (considering only the positive years) of the past three years
2. For a given mean, which distribution would you prefer for frequency modeling where operational risk events are considered dependent, or in other words are seen as clustering together (as opposed to being independent)?
A) Gamma
B) Negative binomial
C) Binomial
D) Poisson
3. The risk that a counterparty fails to deliver its obligation upon settlement while having received the leg owed to it is called:
A) Pre-settlement risk
B) Settlement risk
C) Credit risk
D) Replacement risk
4. For credit risk calculations, correlation between the asset values of two issuers is often proxied with:
A) Credit migration matrices
B) Transition probabilities
C) Default correlations
D) Equity correlations
5. For identical mean and variance, which of the following distribution assumptions will provide a higher estimate of VaR at a high level of confidence?
A) A distribution with kurtosis = 3
B) A distribution with kurtosis = 0
C) A distribution with kurtosis = 2
D) A distribution with kurtosis = 8
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: B | Question # 3 Answer: B | Question # 4 Answer: D | Question # 5 Answer: D |
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