PRMIA 8004 - PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Exam

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Total 110 questions

A VaR model for managing market risk at Barings Bank in London would most likely have:

  • A. Alerted senior management to the problems before the major losses occurred
  • B. Helped very little as Nick Leeson hid many trades
  • C. Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics
  • D. Been used if senior management had ever seen it


Answer : B

A risk assessment report generated by a PRMIA member creates an apparent conflict of interest between the PRMIA standards and those of the client organization.
Of the following, which is the correct hierarchy to follow to resolve the conflict?
I.The decision of a superior within the organization

II.PRMIA Standards -
III.Guidelines from the regulators in which the organization operates

IV.The laws of the country -

  • A. I, II, III, and IV
  • B. IV, III, II, and I
  • C. II, I, IV, and III
  • D. III, II, IV, and I


Answer : B

The Fortress Re finite reinsurance model

  • A. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
  • B. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid annual premiums to cover these policies, and as the risks were spread out over the year the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
  • C. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the future premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
  • D. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, but as the risks were spread out over time the future premiums were not accounted for as current liabilities on the books of the pool members, thus giving a false impression of profitability


Answer : D

Which of the following best characterizes the problems that developed at Bankgesellschaft
Berlin?

  • A. Volume growth at the expense of margin.
  • B. Excessive reliance on volatile trading income.
  • C. Banking is a "for-profit" business, not a means of fulfilling political goals.
  • D. A company culture where profits may justify "excesses."


Answer : C

What was the main risk scenario on the Metallgesellschaft trading strategy?

  • A. Realized losses on short-term contracts against unrealized gains on the long-run contract
  • B. The final price of the underlying being higher than the initial price
  • C. The initial price of the underlying being higher than the final price
  • D. The short-term price of the underlying being higher than the long-run contract


Answer : A

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Total 110 questions