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100% Pass Quiz Latest PRMIA - 8011 Study Material

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The Professional Risk Managers’ International Association (PRMIA) is a globally recognized organization that provides risk management education and certification programs to individuals and institutions. One of their most prestigious certification programs is the Credit and Counterparty Manager (CCRM) Certificate, which is designed to provide professionals with the skills and knowledge necessary to manage credit and counterparty risk in financial institutions.

The CCRM exam covers a range of topics related to credit and counterparty risk management, including credit analysis, financial statement analysis, credit structuring and pricing, credit risk mitigation techniques, counterparty risk management, and regulatory requirements. 8011 Exam is designed to test the candidate's knowledge of these topics and their ability to apply this knowledge in practical situations.

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PRMIA 8011: Credit and Counterparty Manager (CCRM) Certificate is a globally recognized certification program that equips professionals with the knowledge and skills required to effectively manage credit and counterparty risk in financial institutions. The CCRM certification program covers a wide range of topics related to credit and counterparty risk management and is designed to provide a comprehensive understanding of the principles and practices of credit and counterparty risk management. The PRMIA 8011 Exam is a rigorous test of a candidate’s knowledge and skills in credit and counterparty risk management and is a valuable achievement for professionals working in the field.

PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q110-Q115):

NEW QUESTION # 110
The standard error of a Monte Carlo simulation is:

A. The same as that for a lognormal distribution
B. Proportional to the inverse of the square root of the sample size
C. Zero
D. None of the above

Answer: B

Explanation:
When we do a Monte Carlo simulation, the statistic we obtain (eg, the expected price) is an estimate of the real variable. The difference between the real value (which would be what we would get if we had access to the entire population) and that estimated by the Monte Carlo simulation is measured by the 'standard error', which is the standard deviation of the difference between the 'real' value and the simulated value (ie, the 'error').
As we increase the number of draws in a Monte Carlo simulation, the closer our estimate will be to the true value of the variable we are trying to estimate. But increasing the sample size does not reduce the error in a linear way, ie doubling the sample size does not halve the error, but reduces it by the inverse of the square root of the sample size. So if we have a sample size of 1000, going up to a sample size of 100,000 will reduce the standard error by a factor of 10 (and not 100), ie, SQRT(1/100) = 1/10. In other words, standard error is proportional to 1/#N, where N is the sample size.
Therefore Choice 'c' is correct and the others are incorrect.

NEW QUESTION # 111
Which of the following correctly describes a reverse stress test:

A. Stress tests that start from a known stress test outcome and then ask what events could lead to such an outcome for the bank
B. A stress test that requires a role reversal between risk managers and the risk taking business units in order to determine credible scenarios
C. Stress tests that are prescribed and conducted by a regulator in addition to the tests done by a bank
D. A stress test that considers only qualitative factors that go beyond mathematical modeling to examine feedback loops and the effect of macro-economic fundamentals

Answer: A

Explanation:
Generally, stress tests consider a shock or a severe scenario in order to determine the 'what-if' that circumstance were to materialize. They focus on the outcome based upon a set of shocks. In a reverse stress test, the outcome is assumed to be known (generally something as severe as bankruptcy, non-compliance with capital requirements etc), and the test is intended to work out what shocks or events would lead to such an outcome.
Reverse stress tests therefore start from a known stress test outcome (such as breaching regulatory captial ratios, illiquidity or insolvency) and then asking what events could lead to such an outcome for the bank. This can be quite a challenging task. Principle 9 laid out in the BCBS document on stress testing (May 2009) (which is part of the PRM syllabus effective March 1, 2010) lays down the expectations relating to reverse stress tests.
Therefore Choice 'a' is the correct answer. All the other choices are nonsensical.

NEW QUESTION # 112
Which of the following statements are true:
I. Credit risk and counterparty risk are synonymous
II. Counterparty risk is the contingent risk from a counterparty's default in derivative transactions III. Counterparty risk is the risk of a loan default or the risk from moneys lent directly IV. The exposure at default is difficult to estimate for credit risk as it depends upon market movements

A. II and III
B. I and II
C. II
D. III and IV

Answer: C

Explanation:
Credit risk is the risk from a borrower defaulting on moneys lent. Counterparty risk, on the other hand, is the risk that a counterparty to a derivative transaction will be unable to pay at the time the transaction is in-the- money.
Credit risk therefore relates more to the banking book, counterparty risk relates more to the trading book.
Credit risk and counterparty risk differ in that for counterparty risk, the amount at risk fluctuates for counterparty risk depending upon the value of the underlying derivative. Counterparty risk generally starts at zero, for most swaps and other derivatives are near zero value at inception. Over time, as the prices of the underlying instruments move, one party ends up owing money to the other. A deterioration in the financial situation of the party owing moneys may lead to a loss to the other party, resulting in counterparty risk.
Counterparty risk can also arise from stock lending operations and repo trades.
Credit risk on the other hand is the traditional risk of default by a borrower, or a bank's customer who has taken a loan or has an overdraft or other credit facility.
Statement I is therefore incorrect as credit risk and counterparty risks are different.
Statement II is correct as counterparty risk is 'contingent' in the sense it arises only if the transaction with the counterparty ends up being in-the-money, and the counterparty defaults.
Statement III is incorrect. The statement describes credit risk.
Statement IV is incorrect, as the exposure is known for moneys lent. Derivative exposures for the future are difficult to estimate, they can even turn from moneys owed to moneys due as the value of the underlying changes.

NEW QUESTION # 113
The degree distribution of the nodes of the financial network is:

A. normally distributed
B. long tailed
C. non-linear
D. best approximated by a beta distribution

Answer: B

Explanation:
The 'degree' of a node in a network measures the number of links to other nodes. For the financial network, each market participant can be thought of as a node. The 'degree distribution' can be thought of as the histogram of the number of links for each node.
The financial network has a degree distribution with rather long tails - and therefore Choice 'd' is the correct answer. The other choices are incorrect. Long tailed networks have the property that they are robust when affected by random disturbances, but susceptible to targeted attacks, for example on key hubs.

NEW QUESTION # 114
Which of the following is the best description of the spread premium puzzle:

A. The spread premium puzzle refers to the moral hazard implicit in the monoline insurance market
B. The spread premium puzzle refers to dollar denominated non-US sovereign bonds being priced a at significant discount to other similar USD denominated assets
C. The spread premium puzzle refers to observed default rates being much less than implied default rates, leading to lower credit bonds being relatively cheap when compared to their actual default probabilities
D. The spread premium puzzle refers to AAA corporate bonds being priced at almost the same prices as equivalent treasury bonds without offering the same liquidity or guarantee as treasury bonds

Answer: C

Explanation:
Choice 'a' is the correct answer. The other choices represent non-sensical statements.

NEW QUESTION # 115
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