Complete 8010 PRMIA Materials

Which of the following are valid approaches to leveraging external loss data for modeling operational risks:

I. Both internal and external losses can be fitted with distributions,and a weighted average approach using these distributions is relied upon for capital calculations.

II. External loss data is used to inform scenario modeling.

III. External loss data is combined with internal loss data points, and distributions fitted to the combined data set.

IV. External loss data is used to replace internal loss data points to create a higher quality data set to fit distributions.

An investor enters into a 5-year total return swap with Bank A, with the investor paying a fixed rate of 6% annually on a notional value of $100m to the bank and receiving thereturns of the S&P500 index with an identical notional value. The swap is reset monthly, ie the payments are exchanged monthly. On Jan 1 of the fourth year, after settling the last month's payments, the bank enters bankruptcy. What is the legal claim thatthe hedge fund has against the bank in the bankruptcy court?

The loss severity distribution for operational risk loss events is generally modeled by which of the following distributions:

I. the lognormal distribution

II. The gamma density function

III. Generalized hyperbolic distributions

IV. Lognormal mixtures

Which of the following statements is true:

I. Expected credit losses are charged to the unit's P&L while unexpected losses hit risk capital reserves.

II. Credit portfolio loss distributions are symmetrical

III. For a bank holding $10m in face of a defaulted debt that it acquired for $2m, the bank's legal claim in the bankruptcy court will be $10m.

IV. Thelegal claim in bankruptcy court for an over the counter derivatives contract will be the notional value of the contract.