PRMIA 8010 Operational Risk Manager (ORM) Exam Exam Practice Test Questions

• Question 1

  Which of the following credit risk models considers debt as including a put option on the firm's assets to assess credit risk?

  • The actuarial approach
  • The CreditMetrics approach
  • The contingent claims approach
  • CreditPortfolio View

  Show Answer Answer: C Next

• Question 2

  The definition of operational risk per Basel II includes which of the following:1. Risk of loss resulting from inadequate or failed internal processes, people and systems or from external events2. Legal risk3. Strategic risk4. Reputational risk

  • 1, 2, 3 and 4
  • 2 and 3
  • 1 and 3
  • 1 and 2

  Show Answer Answer: D Next

• Question 3

  Under the KMV Moody's approach to credit risk measurement, how is the distance to default converted to expected default frequencies?

  • Using a proprietary database based on historical information
  • Using migration matrices
  • Using a normal distribution
  • Using Monte Carlo simulations

  Show Answer Answer: A Next

• Question 4

  If F be the face value of a firm's debt, V the value of its assets and E the market value of equity, then according to the option pricing approach a default on debt occurs when:

  • F > V
  • V < E
  • F < V
  • F - E < V

  Show Answer Answer: A Next

• Question 5

  Which of the following is true for the actuarial approach to credit risk modeling (CreditRisk+):

  • Default correlations between obligors are accounted for using a multivariate normal model
  • The number of defaults is modeled using a binomial distribution where the number of defaults are considered discrete events
  • The approach considers only default risk, and ignores the risk to portfolio value from credit downgrades
  • The approach is based upon historical rating transition matrices

  Show Answer Answer: C Next