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NEW QUESTION # 11
According to the Group of 30 Report, deriving aggregate potential credit exposure for a counterparty by adding up the potential exposure of multiple transactions:
- A. Captures portfolio effects but not tenor differences
- B. Can easily reflect the impact of netting
- C. Overstates exposure in most cases
- D. Gives an accurate result in most cases
Answer: C
NEW QUESTION # 12
Which of the following would have contributed to noticing and preventing Leeson's violations at Barings?
- A. Separation of front and back offices
- B. All of the above
- C. Recognition that large profits can be an indicator of higher risk
- D. More senior level involvement at Barings regarding use of derivatives
Answer: B
NEW QUESTION # 13
While doing a work assignment, a PRMIA member notices behaviour that is outside the ethical standards of their client organization and reports the matter to their immediate supervisor in the organization (if he or she wasn't the one engaging in such behaviour). The matter is neither progressed nor actioned.
The PRMIA member should:
- A. report the matter to the organization's Compliance Dept.
- B. contact the Whistle-Blowing Hotline of the organization or, if none exits, to the PRMIA Ethics Committee for guidance and assistance
- C. report the matter to their PRMIA chapter
- D. stay silent on the basis that they have reported it
Answer: B
NEW QUESTION # 14
Which of the following should NOT be part of the Risk Management Infrastructure?
- A. Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting
- B. Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole
- C. Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader
- D. Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms
Answer: B
NEW QUESTION # 15
The problems in the Orange County case can best be characterized as failures related to:
- A. Operational and Regulatory Compliance Risk
- B. All of the Above
- C. Credit Risk
- D. Market Risk
Answer: D
NEW QUESTION # 16
Which of the following was NOT a factor in the Long Term Capital Management case?
- A. Model risk
- B. Inadequate separation of front and back offices
- C. Unwinding of liquid positions at the beginning of major losses
- D. Changes/breakdowns in historical correlations
Answer: B
NEW QUESTION # 17
Which of the following best characterizes the problems that developed at Bankgesellschaft Berlin?
- A. A company culture where profits may justify "excesses."
- B. Volume growth at the expense of margin.
- C. Banking is a "for-profit" business, not a means of fulfilling political goals.
- D. Excessive reliance on volatile trading income.
Answer: C
NEW QUESTION # 18
Barings Bank and Orange County have many similarities. Which of the following is NOT a similarity?
- A. Both relied on a star manger, supposedly in a low risk business.
- B. Both losses grew over time, but were not discovered by management until too late.
- C. Both losses were eventually exposed by massive margin calls.
- D. Both traded in illiquid and obscure markets that were easy to manipulate.
Answer: D
NEW QUESTION # 19
When Fannie Mae and Freddie Mac were taken under US government conservatorship, which of the following was not included within their operating mandate?
- A. There was a 2 year limit to the conservatorship
- B. The US government will provide capital as needed in return for preferred shares in the companies
- C. The US government will buy mortgage-backed securities in the open market as needed
- D. Fannie Mae and Freddie Mac will continue to buy home loans from banks to repackage them as mortgage-backed securities
Answer: A
NEW QUESTION # 20
The hedging strategy employed by MG Refining & Marketing has been called:
- A. Nothing because MG Refining & Marketing did not hedge its position
- B. A differential hedge
- C. A stacked hedge
- D. Dynamic hedging
Answer: C
NEW QUESTION # 21
Which of the following was a key problem in the Barings Bank case?
- A. Leeson was executing an arbitrage strategy even though he was not authorized to do so
- B. Having the back office and front office operations under the same person
- C. Difference in the contract sizes in the OSE and SIMEX
- D. The different time zones that the office was trading in
Answer: B
NEW QUESTION # 22
A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:
- A. Respect the client's confidentiality as that takes precedence
- B. Approach the client about the concern, regardless of what their reaction might be
- C. Report this conduct to their immediate supervisor
- D. Report the findings immediately to authorities
Answer: C
NEW QUESTION # 23
The problems at Bankgesellschaft Berlin can best be characterized as failures related to:
- A. Operational Risk
- B. Credit Risk
- C. Market Risk
- D. Both B and C
Answer: D
NEW QUESTION # 24
For the sentence
"The organization shall encourage all employees to keep abreast of the latest developments in their particular areas of expertise, through ____________, _____________, and _____________ and shall make adequate resources available to enable this to occur," Choose the correct combinations of words from the following options:
- A. courses, conferences, journals
- B. conferences, discussion groups, blog sites
- C. journals, courses, compliance mandates
- D. courses, educational certification, journals
Answer: A
NEW QUESTION # 25
The Chair of the PRMIA Board of Directors may hold the following offices:
- A. Chair only
- B. Vice Chair
- C. Secretary
- D. Parliamentarian
Answer: A
NEW QUESTION # 26
Barings failed to recognize that Nick Leeson's losses were increasing because:
- A. Leeson ran the front office
- B. Leeson hid his trades in a suspense account
- C. The London office did not ask for any reports
- D. The margin report sent to London did not show the true margin needs
Answer: B
NEW QUESTION # 27
The "normal" credit loss profile of Washington Mutual was increased by which of the following?
- A. Acquisitions like Long Beach and Providian
- B. The general downturn in the economy of the US
- C. By lowering its own credit underwriting standards
- D. Catastrophic losses in its own credit card division
Answer: A
NEW QUESTION # 28
The Chair of the PRMIA Board of Directors may hold the following offices:
- A. Chair only
- B. Vice Chair
- C. Secretary
- D. Parliamentarian
Answer: A
NEW QUESTION # 29
Finite insurance is reinsurance which
- A. transfers the total risk at the usual reinsurance price
- B. transfers only a limited amount of risk at less cost than traditional reinsurance
- C. transfers only a limited amount of risk at the usual reinsurance price
- D. transfers the total risk at less cost than traditional reinsurance
Answer: B
NEW QUESTION # 30
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