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1. The Basel framework does not permit which of the following Units of Measure (UoM) for operational risk modeling:
I. UoM based on legal entity
II. UoM based on event type
III. UoM based on geography
IV. UoM based on line of business
A) None of the above
B) II only
C) III only
D) I and IV
2. Conditional default probabilities modeled under CreditPortfolio view use a:
A) Probit function
B) Power function
C) Altman's z-score
D) Logit function
3. A stock that follows the Weiner process has its future price determined by:
A) its current price, expected return and standard deviation
B) its expected return and standard deviation
C) its expected return alone
D) its standard deviation and past technical movements
4. Which of the following is true for the actuarial approach to credit risk modeling (CreditRisk+):
A) Default correlations between obligors are accounted for using a multivariate normal model
B) The approach considers only default risk, and ignores the risk to portfolio value from credit downgrades
C) The number ofdefaults is modeled using a binomial distribution where the number of defaults are considered discrete events
D) The approach is based upon historical rating transition matrices
5. For a FX forward contract, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)
A) Roughlythree-quarters of the way towards maturity
B) Right after inception
C) At maturity
D) Indeterminate from the given information
Solutions:
Question # 1 Answer: A | Question # 2 Answer: D | Question # 3 Answer: A | Question # 4 Answer: B | Question # 5 Answer: C |
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