Exam Questions and Answers for 8004 Study Guide Questions and Answers!
PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Certification Sample Questions and Practice Exam
NEW QUESTION # 61
Which of the following CANNOT be counted as a reason why LTCM was given a rescue package and not left to default?
- A. Untimely unwinding of some LTCM positions would lead to large market fluctuations and possible turmoil
- B. The consortium wanted to keep this out of the regulators' eyes
- C. Some of the banks in the rescue consortium were LTCM investors
- D. Many of the banks in the rescue consortium were among LTCM's counterparties
Answer: B
NEW QUESTION # 62
The Q4 2003 trading strategy of China Aviation Oil was
- A. to buy calls and sell puts
- B. to sell calls and buy puts
- C. to sell puts and buy calls
- D. to buy puts and sell calls
Answer: B
NEW QUESTION # 63
According to the Group of 30 Report, dealers and end-users are encouraged to:
- A. Use one trading agreement for foreign exchange forwards and another for foreign exchange options.
- B. Use a single master trading agreement as widely as possible with each counter party.
- C. Use a common trading agreement for interest rate and equity derivatives but a separate agreement for foreign exchange transactions.
- D. Use separate trading agreements for interest rate derivatives, equity derivatives and foreign exchange transactions.
Answer: B
NEW QUESTION # 64
The "normal" credit loss profile of Washington Mutual was increased by which of the following?
- A. Catastrophic losses in its own credit card division
- B. By lowering its own credit underwriting standards
- C. The general downturn in the economy of the US
- D. Acquisitions like Long Beach and Providian
Answer: D
NEW QUESTION # 65
According to the Group of 30 Report, option contracts:
- A. Always generate credit risk to both counterparties
- B. Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation
- C. Create no credit risk, since the buyer need not exercise the option
- D. Usually create credit risk only for the seller (to default by the buyer)
Answer: B
NEW QUESTION # 66
The problems at Bankgesellschaft Berlin can best be characterized as failures related to:
- A. Operational Risk
- B. Market Risk
- C. Both B and C
- D. Credit Risk
Answer: C
NEW QUESTION # 67
A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:
- A. Respect the client's confidentiality as that takes precedence
- B. Approach the client about the concern, regardless of what their reaction might be
- C. Report the findings immediately to authorities
- D. Report this conduct to their immediate supervisor
Answer: D
NEW QUESTION # 68
Boards, including Audit and Risk Committees must:
I.Clearly articulate the corporate risk appetite to senior management
II.Thoroughly review compensation plans of potentially "highly compensated positions" for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholders
III.Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructure
IV.Be fully accountable to shareholders and work to the benefit of public good and financial stability
- A. I, II and IV only
- B. All of these are responsibilities of Board and Audit Committees
- C. I and II only
- D. I, II and III only
Answer: B
NEW QUESTION # 69
The retrocession insurance cover was provided by
- A. Fortress Re and other insurers
- B. The Fortress Re reinsurers only
- C. The fronting insurance companies
- D. Fortress Re and their reinsurers
Answer: B
NEW QUESTION # 70
The problems at Bankers Trust can best be characterized as failures related to:
- A. Operational and Regulatory Compliance Risk
- B. All of the Above
- C. Market Risk
- D. Credit Risk
Answer: A
NEW QUESTION # 71
PRMIA Governance Principles
- A. must be adhered to by all PRMIA member organizations
- B. is a set of recommendations based on research and best practice
- C. must be adhered to by all PRM charter holders
- D. must be adhered to by all financial firms that are PRMIA members
Answer: B
NEW QUESTION # 72
The hedging strategy employed by MG Refining & Marketing has been called:
- A. Nothing because MG Refining & Marketing did not hedge its position
- B. A stacked hedge
- C. Dynamic hedging
- D. A differential hedge
Answer: B
NEW QUESTION # 73
According to the Group of 30 Report, deriving aggregate potential credit exposure for a counterparty by adding up the potential exposure of multiple transactions:
- A. Gives an accurate result in most cases
- B. Captures portfolio effects but not tenor differences
- C. Overstates exposure in most cases
- D. Can easily reflect the impact of netting
Answer: C
NEW QUESTION # 74
Which of the following is NOT part of the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct) Guidance on Ethical Behavior?
- A. Ensure globally accepted standards are adhered to at all costs
- B. Take responsibility for your work
- C. Respect local customs
- D. Respect local laws and regulations
Answer: A
NEW QUESTION # 75
Unlike the case at Barings Bank, National Australia Bank:
- A. Had a Board of Directors that was unaware of the true nature of trading activities
- B. Had a separation of duties between trading and back office
- C. Had a risk management infrastructure that was credited with doing its' job well, despite the losses
- D. Was not dealing in derivatives
Answer: B
NEW QUESTION # 76
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