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The CCRM certificate is targeted at professionals who work in credit risk management, counterparty risk management, credit analysis, and credit portfolio management. 8011 Exam is designed to test candidates' knowledge of the principles and practices of credit and counterparty risk management, including credit analysis, risk measurement, and portfolio management. Credit and Counterparty Manager (CCRM) Certificate Exam certification is recognized globally and is highly valued by employers in the financial industry.

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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q66-Q71):

NEW QUESTION # 66
Which of the following statements are true:
I. The sum of unexpected losses for individual loans in a portfolio is equal to the total unexpected loss for the portfolio.
II. The sum of unexpected losses for individual loans in a portfolio is less than the total unexpected loss for the portfolio.
III. The sum of unexpected losses for individual loans in a portfolio is greater than the total unexpected loss for the portfolio.
IV. The unexpected loss for the portfolio is driven by the unexpected losses of the individual loans in the portfolio and the default correlation between these loans.

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

Answer: A

Explanation:
Unexpected losses (UEL) for individual loans in a portfolio will always sum to greater than the total unexpected loss for the portfolio (unless all the loans are correlated in such a way that they default together).
This is akin to the 'diversification effect' in market risk, in other words, not all the obligors would default together. So the UEL for the portfolio will always be less than the sum of the UELs for individual loans.
Therefore statement III is true.This 'diversification effect' will be affected by the default correlations between the obligors, in cases where the probability of various obligors defaulting together is low, the UEL for the portfolio would be much less than the UEL for the individual loans. Hence statement IV is true.I and II are false for the reasons explained above.

NEW QUESTION # 67
A bank expects the error rate in transaction data entry for a particular business process to be 0.005%. What is the range of expected errors in a day within +/- 2 standard deviations if there are 2,000,000 such transactions each day?

A. 90 to 110 errors in a day
B. 80 to 120 errors in a day
C. 0 to 200 errors in a day
D. 60 to 80 errors in a day

Answer: B

Explanation:
Error rates are generally modeled using the Poisson distribution. Recall that the Poisson distribution has only one parameter -#- which is its mean and also its variance.
In the given case, the mean number of errors is 2,000,000 x 0.005% = 100. Since this is the variance as well, the standard deviation is #100 = 10. Therefore the range of outcomes within 2 standard deviations of the mean is 100 +/- (2*10) = 80 to 120 errors in a day.

NEW QUESTION # 68
Which loss event type is the failure to timely deliver collateral classified as under the Basel II framework?

A. External fraud
B. Clients, products and business practices
C. Execution, Delivery & Process Management
D. Information security

Answer: C

Explanation:
Refer to the detailed loss event type classification under Basel II (see Annex 9 of the accord). You should know the exact names of all loss event types, and examples of each.

NEW QUESTION # 69
Which of the following situations are not suitable for applying parametric VaR:
I. Where the portfolio's valuation is linearly dependent upon risk factors II. Where the portfolio consists of non-linear products such as options and large moves are involved III. Where the returns of risk factors are known to be not normally distributed

A. II and III
B. All of the above
C. I and III
D. I and II

Answer: A

Explanation:
Parametric VaR relies upon reducing a portfolio's positions to risk factors, and estimating the first order changes in portfolio values from each of the risk factors. This is called the delta approximation approach. Risk factors include stock index values, or the PV01 for interest rate products, or volatility for options. This approach can be quite accurate and computationally efficient if the portfolio comprises products whose value behaves linearly to changes in risk factors. This includes long and short positions in equities, commodities and the like.
However, where non-linear products such as options are involved and large moves in the risk factors are anticipated, a delta approximation based valuation may not give accurate results, and the VaR may be misstated. Therefore in such situations parametric VaR is not advised (unless it is extended to include second and third level sensitivities which can bring its own share of problems).
Parametric VaR also assumes that the returns of risk factors are normally distributed - an assumption that is violated in times of market stress. So if it is known that the risk factor returns are not normally distributed, it is not advisable to use parametric VaR.

NEW QUESTION # 70
The key difference between 'top down models' and 'bottom up models' for operational risk assessment is:

A. Bottom up approaches to operational risk calculate the implied operational risk using available data such as income volatility, capital etc; while top down approaches use causal factors, risk drivers and other factors to get an aggregated estimate of risk.
B. Top down approaches to operational risk are based upon an analysis of key risk drivers, while bottom up approaches consider causality in risk scenarios.
C. Top down approaches to operational risk calculate the implied operational risk using available data such as income volatility, capital etc; while bottom up approaches use causal factors, risk drivers and other factors to get an aggregated estimate of risk.
D. Bottom up approaches to operational risk are based upon an analysis of key risk drivers, while top down approaches consider causality in risk scenarios.

Answer: C

Explanation:
Top down approaches rely upon available data such as total capital, income volatility, peer group information etc and attempt to imply the capital attributable to operational risk. They do not consider firm specific scenarios or causal factors. Bottom up approaches on the other hand attempt to determine operational risk capital based upon an identification and quantification of firm specific risks. Bottom up approaches help determine a traditional loss distribution from which capital requirements can be determined at a given level of confidence.
Therefore Choice 'd' is the correct answer.

NEW QUESTION # 71
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