- Home
- PRMIA
- PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition
- PRMIA.8008.v2021-08-28.q125
- Question 38
Valid 8008 Dumps shared by ExamDiscuss.com for Helping Passing 8008 Exam! ExamDiscuss.com now offer the newest 8008 exam dumps, the ExamDiscuss.com 8008 exam questions have been updated and answers have been corrected get the newest ExamDiscuss.com 8008 dumps with Test Engine here:
Access 8008 Dumps Premium Version
(359 Q&As Dumps, 35%OFF Special Discount Code: freecram)
<< Prev Question Next Question >>
Question 38/125
What is the combined VaR of two securities that are perfectly positively correlated.
Correct Answer: B
Explanation
Choice 'b' is the correct answer. When two securities have a correlation of +1, they are effectively the same security. In such cases, the standard deviations of the two securities are additive, which means the VaRs can simply be added together to get the combined VaR. All the other choices are incorrect.
Choice 'c' in particular would have been correct if the securities were completely uncorrelated, ie if they had a correlation of zero.
Choice 'a' would have been correct if their correlation were -1.
Choice 'b' is the correct answer. When two securities have a correlation of +1, they are effectively the same security. In such cases, the standard deviations of the two securities are additive, which means the VaRs can simply be added together to get the combined VaR. All the other choices are incorrect.
Choice 'c' in particular would have been correct if the securities were completely uncorrelated, ie if they had a correlation of zero.
Choice 'a' would have been correct if their correlation were -1.
- Question List (125q)
- Question 1: Which of the following data sources are expected to influenc...
- Question 2: A risk analyst peforming PCA wishes to explain 80% of the va...
- Question 3: Which of the following represent the parameters that define ...
- Question 4: Economic capital under the Earnings Volatility approach is c...
- Question 5: Which of the following best describes economic capital?...
- Question 6: A bank's detailed portfolio data on positions held in a part...
- Question 7: Credit exposure for derivatives is measured using...
- Question 8: Which of the following assumptions underlie the 'square root...
- Question 9: For a security with a daily standard deviation of 2%, calcul...
- Question 10: Which of the following statements is true:...
- Question 11: When building a operational loss distribution by combining a...
- Question 12: If F be the face value of a firm's debt, V the value of its ...
- Question 13: For a hypotherical UoM, the number of losses in two non-over...
- Question 14: A corporate bond maturing in 1 year yields 8.5% per year, wh...
- Question 15: In respect of operational risk capital calculations, the Bas...
- Question 16: Which of the following statements is true in respect of diff...
- Question 17: The capital adequacy ratio applied to risk weighted assets f...
- Question 18: The systemic manifestation of the liquidity crisis during th...
- Question 19: Which of the following risks and reasons justify the use of ...
- Question 20: If the marginal probabilities of default for a corporate bon...
- Question 21: Which of the following losses can be attributed to credit ri...
- Question 22: Under the contingent claims approach to measuring credit ris...
- Question 23: Which of the following situations are not suitable for apply...
- Question 24: An assumption regarding the absence of ratings momentum is r...
- Question 25: A bank extends a loan of $1m to a home buyer to buy a house ...
- Question 26: A risk analyst attempting to model the tail of a loss distri...
- Question 27: Which of the following contributed to the systemic failure d...
- Question 28: The generalized Pareto distribution, when used in the contex...
- Question 29: Which loss event type is the failure to timely deliver colla...
- Question 30: Which of the following statements is true?...
- Question 31: When performing portfolio stress tests using hypothetical sc...
- Question 32: Which of the following is the most accurate description of E...
- Question 33: The estimate of historical VaR at 99% confidence based on a ...
- Question 34: Which of the following attributes of an investment are affec...
- Question 35: Which of the following statements is correct in relation to ...
- Question 36: A portfolio's 1-day VaR at the 99% confidence level is $250m...
- Question 37: Which of the following statements is true I. If no loss data...
- Question 38: What is the combined VaR of two securities that are perfectl...
- Question 39: Which of the following best describes the concept of margina...
- Question 40: Which of the following statements are true: I. The sum of un...
- Question 41: Under the KMV Moody's approach to credit risk measurement, h...
- Question 42: Which of the following statements is true in relation to a n...
- Question 43: Which of the following statements are true? I. Retail Risk B...
- Question 44: A bullet bond and an amortizing loan are issued at the same ...
- Question 45: A bank evaluates the impact of large and severe changes in c...
- Question 46: For a corporate issuer, which of the following can be used t...
- Question 47: As opposed to traditional accounting based measures, risk ad...
- Question 48: If the annual default hazard rate for a borrower is 10%, wha...
- Question 49: When compared to a high severity low frequency risk, the ope...
- Question 50: long bond position is hedged using a short position in the f...
- Question 51: Altman's Z-score does not consider which of the following ra...
- Question 52: Under the standardized approach to calculating operational r...
- Question 53: For a group of assets known to be positively correlated, wha...
- Question 54: A derivative contract has a negative current replacement val...
- Question 55: If EV be the expected value of a firm's assets in a year, an...
- Question 56: Which of the following statements are true: I. Stress testin...
- Question 57: The minimum 'multiplication factor' to be applied to VaR cal...
- Question 58: Which of the following statements is true? I. Real Time Gros...
- Question 59: Under the credit migration approach to assessing portfolio c...
- Question 60: A bank prices retail credit loans based on median default ra...
- Question 61: Which of the following are elements of 'group risk': I. Mark...
- Question 62: Which of the following statements are true: I. Common scenar...
- Question 63: Which of the following introduces model error when basing Va...
- Question 64: The accuracy of a VaR estimate based on a Monte carlo simula...
- Question 65: CreditRisk+, the actuarial model for calculating portfolio c...
- Question 66: Which of the following credit risk models includes a conside...
- Question 67: What ensures that firms are not able to selectively default ...
- Question 68: If the loss given default is denoted by L, and the recovery ...
- Question 69: The returns for a stock have a monthly volatilty of 5%. Calc...
- Question 70: Which of the following is a valid approach to determining th...
- Question 71: Fill in the blank in the following sentence: Principal compo...
- Question 72: The key difference between 'top down models' and 'bottom up ...
- Question 73: The results of 'desk-level' stress tests cannot be added tog...
- Question 74: Which of the following are valid approaches for extreme valu...
- Question 75: Calculate the 1-year 99% credit VaR of a portfolio of two bo...
- Question 76: Which of the following are considered properties of a 'coher...
- Question 77: Conditional default probabilities modeled under CreditPortfo...
- Question 78: If the full notional value of a debt portfolio is $100m, its...
- Question 79: Which of the formulae below describes incremental VaR where ...
- Question 80: Which of the following is not a possible early warning indic...
- Question 81: The CDS quote for the bonds of Bank X is 200 bps. Assuming a...
- Question 82: The degree distribution of the nodes of the financial networ...
- Question 83: When doing stress tests based on historical scenarios, if no...
- Question 84: Which of the following is not a risk faced by a bank from ho...
- Question 85: For an equity portfolio valued at V whose beta is , the valu...
- Question 86: According to the Basel II standard, which of the following c...
- Question 87: Which of the following statements is true: I. Confidence lev...
- Question 88: Which of the following statements are true in relation to Hi...
- Question 89: Which of the following is the most important problem to solv...
- Question 90: If the duration of a bond yielding 10% is 6 years, the volat...
- Question 91: Which of the following is not one of the 'three pillars' spe...
- Question 92: Which of the following is not an approach used for stress te...
- Question 93: An operational loss severity distribution is estimated using...
- Question 94: As part of designing a reverse stress test, at what point sh...
- Question 95: According to the Basel framework, reserves resulting from th...
- Question 96: Which of the following methods cannot be used to calculate L...
- Question 97: If two bonds with identical credit ratings, coupon and matur...
- Question 98: The 99% 10-day VaR for a bank is $200mm. The average VaR for...
- Question 99: Which of the following is not a limitation of the univariate...
- Question 100: Which of the following describes rating transition matrices ...
- Question 101: What is the annualized steady state volatility under a GARCH...
- Question 102: The frequency distribution for operational risk loss events ...
- Question 103: Which of the following statements is true: I. Recovery rate ...
- Question 104: If the odds of default are 1:5, what is the probability of d...
- Question 105: Which of the following is a most complete measure of the liq...
- Question 106: Under the internal ratings based approach for risk weighted ...
- Question 107: What does a middle office do for a trading desk?...
- Question 108: The risk that a counterparty fails to deliver its obligation...
- Question 109: Which of the following statements is true in relation to col...
- Question 110: Which of the following are measures of liquidity risk I. Liq...
- Question 111: Which of the following statements is true in respect of a no...
- Question 112: Which of the following are valid objectives of a reverse str...
- Question 113: An assumption of normality when returns data have fat tails ...
- Question 114: Which of the following formulae describes Marginal VaR for a...
- Question 115: What is the risk horizon period used for credit risk as gene...
- Question 116: Which of the following is true in relation to a Contingency ...
- Question 117: If the systematic VaR for an equity portfolio is $100 and th...
- Question 118: An asset has a volatility of 10% per year. An investment man...
- Question 119: Which of the following cannot be used to address the issue o...
- Question 120: Which of the following statements are true: I. Pre-settlemen...
- Question 121: Which of the following is NOT true in respect of bilateral c...
- Question 122: Which of the following are valid methods for selecting an ap...
- Question 123: Which of the following was not a policy response introduced ...
- Question 124: The definition of operational risk per Basel II includes whi...
- Question 125: Which of the following statements is true? I. It is sufficie...
