8010 Exam Dumps : Operational Risk Manager (ORM) Exam

The exposure at default is the greatest for the certificate of deposit as the entire notional amount is exposed to the risk of default. The other choices represent derivatives for which the current replacement value, which would be far less than notional, would be the credit exposure.

Said another way - if the counterparty were to default, the entire money in the CD would be at risk, whereas for the derivative contracts it would only be the replacement value that would be at risk.

Internal loss data isgenerally the highest quality as it is relevant, and is 'real' as it has occurred to the organization. External loss data suffers from a significant limitation that the risk profiles of the banks to which the data relates is generally not known due to anonymization, and may likely may not be applicable to the bank performing the calculations. Therefore, replacing external loss data with external loss data is not a good idea. Statement IV is therefore incorrect.

All other approach described are valid approaches for the risk analyst to consider and implement. Therefore statements I, II and III are correct and IV is not.

The risk analyst is using the block maxima approach. The data points that result will then be used to fit a GEV distribution.

Expected shortfall refers to the expected losses beyond a specified threshold. The peaks-over-threshold approach is an alternative approach to the block maxima approach, and involves considering exceedances above a threshold. Fourier transformation is not relevant in this context, and is a non-sensical option.