Question 1

For a hypotherical UoM, the number of losses in two non-overlapping datasets is 24 and 32 respectively. The Pareto tail parameters for the two datasets calculated using the maximum likelihood estimation method are 2 and 3. What is an estimate of the tail parameter of the combined dataset?

Options :

A : 2.57

B : 2.23

C : 3

D : Cannot be determined

Answer: A

Question 2

The frequency distribution for operational risk loss events can be modeled by which of the following

distributions:

I. The binomial distribution

II. The Poisson distribution

III. The negative binomial distribution

IV. The omega distribution

Options :

A : I, II and III

B : I and III

C : I, III and IV

D : I, II, III and IV

Answer: A

Question 3

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

Options :

A : II and III

B : I and II

C : II

D : III and IV

Answer: C

Question 4

In respect of operational risk capital calculations, the Basel II accord recommends a confidence leveland time horizon of

Options :

A : 99.9% confidence level over a 10 day time horizon

B : 99% confidence level over a 10 year time horizon

C : 99% confidence level over a 1 year time horizon

D : 99.9% confidence level over a 1 year time horizon

Answer: D

Question 5

The Options Theoretic approach to calculating economic capital considers the value of capital as being equivalent to a call option with a strike price equal to:

Options :

A : The notional value ofthe debt

B : The market value of the debt

C : The value of the firm

D : The value of the assets

Answer: A

Confidently Practice Online with Free 8010 Exam Cram

Buying Options: