8004 Exam Dumps - PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics

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Question # 9

What was the most important loss for Bankers Trust?

Money due to unfavourable market moves

Loss of its' reputation due to actions seen as detrimental to their clients

Loss of market share due to their licenses being revoked

Time spent on legal proceedings in courts

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Question # 10

According to the Group of 30 Report, important risks associated with dynamic hedging are:

Greater volatility than expected over the life of an option

Sudden gaps in market prices

Both A and B

Neither A nor B

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Question # 11

Which of the following is part of the Group of 30 Report's market risk and stress testing recommendations?

To be consistent with regulatory capital measures, 10-day holding periods should be standardized for VaR reporting

Historic simulations are not effective methods of stress testing

Stress tests should incorporate changes in liquidity

Market risk VaR measures should be multiplied by 3 to get to a stress test figure, as long as the VaR model has been back-tested

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Question # 12

MGRM's losses due to "stacking" started to increase when

the oil market went from contango to backwardation

the oil market went from backwardation to contango

the oil market went from weak backwardation to strong backwardation

the oil market went from strong contango to weak contango

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Question # 13

When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?

Only a few months previously it had reported record profits.

The quality of its' assets was never in question.

For many years it was regarded as a star-performer in the financial markets.

Its' loan loss record was poor by industry standards.

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Question # 14

According to the Northern Rock Case Study, what is Forced Insolvency?

The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors

The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)

The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital

The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors

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Question # 15

The Chair of the PRMIA Board of Directors may hold the following offices:

Parliamentarian

Secretary

Vice Chair

Chair only

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Question # 16

Which of the following are PRMIA Governance Principles?

I. Sufficiency of Key Resources and Process

II. State of the Art Risk Management Technology