FRM一级
1.An operational risk analyst is considering using scenario analysis to complement her regular analysis, given limited internal operational loss data. Which of the following correctly identifies a disadvantage of scenario analysis for operational risk?
A. The market environment tends to change quickly, making operational loss scenarios obsolete before the can be utilized.
B. scenario analysis tends to take up a considerable amount of management's time and attention.
C. Scenarios include losses that banks have never experienced and are therefore not acceptable to regulators.
D. Scenario analysis is highly quantitative and therefore exposed to model risk.
2.Which of the following statements is incorrect regarding a Bernoulli distributed random variable.
I. It only has three possible outcomes.
II. It is commonly used for assessing whether or not a company defaults during a specified time period.
A. II only.
B. I only.
C. Both I and II.
D. Neither I nor II.
3.Positive convexity in bond prices implies all but which of the following statements?
A. As yields increase, changes in yield have a smaller effect on bond prices.
B. As yields decrease, changes in yield have a larger effect on bond prices.
C. The price volatility of non-callable bonds is inversely related to the level of market yields.
D. Bond prices approach a ceiling as interest rates fall.
FRM二级
4.If a firm has counterparty exposure by ways of several derivative contact， the firm's potential future exposure (PFE) can be reduced by each of the following except:
A. Compression and tear-up operations
B. Co11ateralization of residual net exposures
C. Offsetting positions with bilateral contracts with new counterparties
D. Netting of bilateral positions
5.An approach to assessing regulatory capital for operational risk that bases the capital charge upon a fixed percentage of an indicator (gross income) of operational risk exposure, where the per∞l ntage differs across business lines is the:
A. Basic indicator approach.
B. Internal rneasurement approach.
C. Loss distribution approach.
D. Standardized approach
6.An analyst regresses the returns of 200 stocks against the returns of a major market index. The resulting pool of 200 alphas has a residual risk of 25% and an information coefficient of 8%. If the alphas are normally distributed with a mean of 0%, roughly how many stocks have an alpha greater than 4% or less than -4%?
A. 8
B. 10
C. 16
D. 25
Answer:
1.A
One method for obtaining additional operational risk data points is to use scenario analysis. Regulators encourage the use of scenarios since this approach allows management to incorporate events that have not yet occured.
2.B
Bernoulli distributed random variable only has two possible outcomes. The outcomes can be defined as either a “success” or a “failure.”
3.D
The convexity of bond prices means that bond prices as a function of interest rates approach a floor as interest rates rise.
4.A
Cross-product netting works with derivative transactions that can have both a positive and a negative value. In the case of a default by either counterparty, a netting agreement will allow transactions to be aggregated and reduce the risk for both parties. Collateralization occurs in the form of a collateral agreement between two counterparties that reduces exposure by requiring sufficient collateral to be posted by either counterparty to support the net exposure between them.
Diversification of counterparty risk limits credit exposure to any given counterparty consistent with the default probability ofthe counterparty. When an institution trades with more counterparties, there is much less exposure to the failure of any given counterparty.
5.D
The standardized approach to measuring operational risk allows banks to divide activities along standardized business lines. The percentages of gross income differ across business lines in the standardized approach.
6.B
The standard deviation (std) of the alphas = Residual Risk (volatility)*Information Coefficient (IC) =0.25*0.08=0.02. 4% is twice of the standard deviation of the alphas. The alphas follow normal distribution with mean 0, so about 5% of the alphas are out of the interval [-4%,4%]. The total number of stocks is 200, so roughly there are 10 alphas that are out of the range.
