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8011 Test Pdf | 8011 Practice Questions

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Earning the PRMIA 8011 Certification provides professionals with a globally recognized credential that demonstrates their expertise in credit and counterparty risk management. Credit and Counterparty Manager (CCRM) Certificate Exam certification can enhance career opportunities, increase earning potential, and demonstrate a commitment to professional development and excellence.

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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q272-Q277):

NEW QUESTION # 272
Which of the following represent the parameters that define a VaR estimate?

A. trading position and distribution assumption
B. confidence level, the holding period and expected volatility
C. confidence level and the underlying stochastic process
D. confidence level and the holding period

Answer: D

Explanation:
VaR is specified by just two parameters - the holding period, and the confidence level. We speak of, for example, a 10-day VaR at the 95% confidence level. No other parameters are required.Therefore Choice 'd' is the correct answer and the others are incorrect.

NEW QUESTION # 273
Which of the following formulae describes CVA (Credit Valuation Adjustment)? All acronyms have their usual meanings (LGD=Loss Given Default, ENE=Expected Negative Exposure, EE=Expected Exposure, PD=Probability of Default, EPE=Expected Positive Exposure, PFE=Potential Future Exposure)

A. LGD * EE * PD
B. LGD * ENE * PD
C. LGD * EPE * PD
D. LGD * PFE * PD

Answer: C

Explanation:
The correct definition of CVA is LGD * EPE * PD. All other answers are incorrect.
CVA reflects the adjustment for counterparty default on derivative and other trading book transactions. This reflects the credit charge, that neeeds to be reduced from the expected value of the transaction to determine its true value. It is calculated as a product of the loss given default, the probability of default and the average weighted exposure of future EPEs across the time horizon for the transaction.
The future exposures need to be discounted to the present, and occasionally the equations for CVA will state that explicitly. Similarly, in some more advanced dynamic models the correlation between EPE and PD is also accounted for. The conceptual ideal though remains the same: CVA=LGD*EPE*PD.

NEW QUESTION # 274
There are three bonds in a diversified bond portfolio, whose default probabilities are independent of each other and equal to 1%, 2% and 3% respectively over a 1 year time horizon. Calculate the probability that none of the three bonds will default.

A. 0.0006%
B. 0.11%
C. 2%
D. 94%

Answer: D

Explanation:
The probability that only none of the three bonds will default is equal to the probability of all surviving. Since default correlation is zero, we can simply multiply the probabilities of survival. Therefore the correct answer is 94% = (1 - 1%) * (1 - 2%) * (1 - 3%)

NEW QUESTION # 275
What is the annualized steady state volatility under a GARCH model where alpha is 0.1, beta is 0.8 and omega is 0.00025?

A. 0.1
B. 0.05
C. 0.08
D. 0.0025

Answer: B

Explanation:
Steady state variance under the GARCH model is given by the formula #/(1 - # - #). In this case, steady state variance therefore works out to 0.00025/(1 - 0.1 - 0.8) = 0.0025. Since this is the variance, volatility is the square root of 0.0025, which works out to 0.05.
Thus, 5% (=0.05) is the correct answer, and the others are incorrect.
Also recall the following in respect of GARCH:
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NEW QUESTION # 276
Which of the following introduces model error when basing VaR on a normal distribution with a static mean and standard deviation?

A. All of the above
B. Heavy tails
C. Autocorrelation of squared returns
D. Volatility clustering

Answer: A

Explanation:
When VaR is based on an assumption of normality with a static mean and volatility, it means anything that violates these assumptions will introduce model error. Volatility clustering implies a non-static volatility.
Heavy tails imply non-normality of the shape of the distribution. Autocorrelation of squared returns implies that returns are not independent and identically distributed. Therefore all of these introduce model error.
Choice 'd' is therefore the correct answer.

NEW QUESTION # 277
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