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| Section | Objectives |
|---|---|
| Topic 1: Classic Credit Risk | - Credit risk methodology
|
| Topic 2: Credit Derivatives and Securitization | - Credit derivatives instruments - Securitization structures and process |
| Topic 3: Credit Portfolio Management | - Risk concentration and diversification - Portfolio credit risk measurement |
| Topic 4: CVA and DVA | - Measurement and interpretation - Valuation adjustments |
| Topic 5: Modern Credit Risk Modeling | - PD/LGD modeling frameworks - Credit VaR and loss distribution simulation |
| Topic 6: SA-CCR and Regulatory Frameworks | - Standardized Approach for Counterparty Credit Risk |
| Topic 7: Counterparty Risk | - Definition and sources of counterparty risk - Mitigation techniques (netting, collateral) |
1. Which of the following statements are true in relation to the current state of the financial network?
I. Interconnectivity between countries has reduced while that between institutions in the same country has increased significantly II. The degrees of separation between institutions has gone up III. The average path length connecting any two given institutions has shrunk IV. Knife-edge dynamics imply that systemic risk arises from the financial system flipping from risk sharing to risk spreading
A) III and IV
B) I and II
C) II and III
D) I and IV
2. The estimate of historical VaR at 99% confidence based on a set of data with 100 observations will end up being:
A) None of the above
B) the weighted average of the top 2.33 observations
C) the worst single observation in the data set
D) the extrapolated returns of the last 1.64 observations
3. Which of the following credit risk models considers debt as including a put option on the firm's assets to assess credit risk?
A) The CreditMetrics approach
B) CreditPortfolio View
C) The actuarial approach
D) The contingent claims approach
4. A risk management function is best organized as:
A) a part of the trading desks and other risk taking teams
B) report independently of the risk taking functions
C) integrated with the risk taking functions as risk management should be a pervasive activity carried out at all levels of the organization.
D) reporting directly to the traders, as to be closest to the point at which risks are being taken
5. 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) 0.80%
B) 2.00%
C) 3.33%
D) 5.00%
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: C | Question # 3 Answer: D | Question # 4 Answer: B | Question # 5 Answer: C |
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