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PRMIA 8008 Exam Syllabus Topics:

SectionObjectives
Operational Risk- Operational Risk Measurement and Controls
- Operational Risk Identification and Assessment
Market Risk- Market Risk Measurement Techniques
- Market Risk Models and VAR
Credit Risk- Credit Risk Mitigation and Management
- Credit Risk Analysis and Measurement
Risk Management Frameworks- Enterprise Risk Management Principles
- Governance and Risk Culture
Funds Transfer Pricing (FTP)- FTP Framework and Methodologies
- FTP Implementation and Governance
Asset-Liability Management (ALM)- Liquidity and Funding Risk Management
- Interest Rate Risk in the Banking Book
Counterparty Risk- Counterparty Exposure and Collateral Management
- Pre-Settlement and Settlement Risk

PRMIA PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition Sample Questions:

There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds over a one year horizon are 0.03 and 0.08 respectively. If the default correlation is zero, what is the one year expected loss on this portfolio?

  • A. $1.38m
  • B. $5.5m
  • C. $11m
  • D. $5.26m
Answer: B

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

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

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The CDS rate on a defaultable bond is approximated by which of the following expressions:

  • A. Loss given default x Default hazard rate
  • B. Hazard rate / (1 - Recovery rate)
  • C. Credit spread x Loss given default
  • D. Hazard rate x Recovery rate
Answer: A

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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. 5.00%
  • B. 2.00%
  • C. 0.80%
  • D. 3.33%
Answer: D

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Which of the following is not a tool available to financial institutions for managing credit risk:

  • A. Cumulative accuracy plot
  • B. Third party guarantees
  • C. Collateral
  • D. Credit derivatives
Answer: A

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