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| Section | Objectives |
|---|---|
| Topic 1: Classic Credit Risk Methodology | - Risk management practices
|
| Topic 2: CVA and DVA | - Credit valuation adjustment
|
| Topic 3: Credit Derivatives and Securitization | - Securitization structures
|
| Topic 4: Standardized Approach for Counterparty Credit Risk | - SA-CCR framework
|
| Topic 5: Credit Portfolio Management | - Portfolio monitoring
|
| Topic 6: Counterparty Risk | - Risk mitigation
|
| Topic 7: Modern Credit Risk Modeling | - PD/LGD modeling
|
| Topic 8: Management of CVA and DVA | - Operational implementation
|
| Topic 9: Classic Credit Products and Lifecycle | - Traditional credit products
|
1. A portfolio's 1-day VaR at the 99% confidence level is $250m. What is the annual volatility of the portfolio?
(assuming 250 days in the year)
A) $2,410.3m
B) $1,699.4m
C) $107.5m
D) $3,952.8m
2. The CDS quote for the bonds of Bank X is 200 bps. Assuming a recovery rate of 40%, calculate the default hazard rate priced in the CDS quote.
A) 3.33%
B) 5.00%
C) 2.00%
D) 0.80%
3. Which of the following is not a consideration in determining the liquidity needs of a firm (as opposed to determining the time horizon for liquidity risk)?
A) Collateral
B) The firm's business model
C) Speed with which new equity can be issued to the owners
D) Off balance sheet items
4. When fitting a distribution in excess of a threshold as part of the body-tail distribution method described by the equation below, how is the parameter 'p' calculated.
Here, F(x) is the severity distribution. F(Tail) and F(Body) are the parametric distributions selected for the tail and the body, and T is the threshold in excess of which the tail is considered to begin.
A) p is a function of the reporting threshold and determined by the log-likelihood functional
B) If there are N observations, of which K are up to T, then p = k/N
C) If there are K observations up to the tail threshold, then p = k*n
D) p is a parameter estimated using either the sum of least squares or maximum likelihood estimation
5. A bullet bond and an amortizing loan are issued at the same time with the same maturity and with the same principal. Which of these would have a greater credit exposure halfway through their life?
A) The amortizing loan
B) Indeterminate with the given information
C) The bullet bond
D) They would have identical exposure half way through their lives
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: A | Question # 3 Answer: C | Question # 4 Answer: B | Question # 5 Answer: C |
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