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PRMIA 8009 Dumps

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Total 110 questions

Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition Questions and Answers

Question 1

The early 2003 trading strategy of China Aviation oil was

Options:

A.

to buy calls and sell puts

B.

to buy puts and sell calls

C.

to sell puts and buy calls

D.

to sell calls and buy puts

Question 2

Which of the following is FALSE?

Options:

A.

Nick Leeson also ran the back office for his trading area

B.

Nick Leeson dealt in complex derivatives lacking transparency of pricing

C.

SIMEX made inquiries to Barings Bank about large margin calls on its positions

D.

Nick Leeson claimed to be running an arbitrage book

Question 3

Taisei Fire and Marine Insurance Co

Options:

A.

relied almost entirely on Fortress Re's management team for information on the risks in its portfolio

B.

relied on the information it received from other members of the reinsurance pool to manage its risks

C.

had a full understanding from Fortress Re of the risks in the pool

D.

had a full understanding from other members of the pool of the pool's liabilities

Question 4

The problems which initiated the crisis at Northern Rock during the summer of 2007 were:

Options:

A.

Large customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent

B.

Doubts arising about the viability of the business model which necessitated Bank of England intervention

C.

A general lack of confidence in mortgage backed securities associated in large part with developments in the US sub-prime mortgage market, and doubts emerging about the viability of the Northern Rock business model

D.

A depositor run on the bank, following doubts about the viability of the Northern Rock business model

Question 5

PRMIA Governance Principles

Options:

A.

must be adhered to by all PRMIA member organizations

B.

is a set of recommendations based on research and best practice

C.

must be adhered to by all PRM charter holders

D.

must be adhered to by all financial firms that are PRMIA members

Question 6

The problems at Bankgesellschaft Berlin can best be characterized as failures related to:

Options:

A.

Market Risk

B.

Credit Risk

C.

Operational Risk

D.

Both B and C

Question 7

When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?

Options:

A.

Only a few months previously it had reported record profits.

B.

The quality of its' assets was never in question.

C.

For many years it was regarded as a star-performer in the financial markets.

D.

Its' loan loss record was poor by industry standards.

Question 8

Which of the following does NOT relate to the Orange County case?

Options:

A.

Where there are excess rewards, there must be risks

B.

The Know Your Customer rule

C.

Strategies that are not possible to explain to third parties should not be employed by the risk averse

D.

Fractured organisational structure and poor risk oversight mechanism make it easy for powerful individuals to hide risk in the gaps

Question 9

The Fortress Re finite reinsurance model

Options:

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

Question 10

For the sentence

"The organization should have at its disposal employees who have adequate _________, ________ and _______ to perform the tasks assigned to them",

Choose the correct combination of words from the following options:

Options:

A.

knowledge, skills, expertise

B.

experience, skills, previous successes

C.

risk appetite, knowledge, expertise

D.

track record, expertise, skills

Question 11

Unlike the case at Barings Bank, National Australia Bank:

Options:

A.

Had a risk management infrastructure that was credited with doing its' job well, despite the losses

B.

Was not dealing in derivatives

C.

Had a Board of Directors that was unaware of the true nature of trading activities

D.

Had a separation of duties between trading and back office

Question 12

According to the Group of 30 Report, option contracts:

Options:

A.

Always generate credit risk to both counterparties

B.

Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation

C.

Create no credit risk, since the buyer need not exercise the option

D.

Usually create credit risk only for the seller (to default by the buyer)

Question 13

Which of the following was NOT a factor in the National Australia Bank case?

Options:

A.

Rogue traders

B.

Improper or insufficient Board-level communication regarding the importance of risk management and oversight

C.

Inadequate back office procedures

D.

Money laundering using foreign exchange trades for political leaders

Question 14

Which of the following was not received by Northern Rock as official support from the UK banking and government authorities?

Options:

A.

A covert money market support operation designed to cover up the difficulties Northern Rock was facing

B.

The Bank of England's role as Lender-Of-Last-resort was activated at a penalty interest rate of 150 basis points above the Bank Rate

C.

The UK government offered to guarantee all existing and new retail deposits, and to most other creditors

D.

The Bank of England provided an additional unlimited facility secured on the collateral of all Northern Rock assets

Question 15

The multi-dimensional risk problem at Northern Rock did not include which one of the combinations of the following?

Options:

A.

LPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection

B.

Corporate Governance; Moral Hazard; Role of Government; and Credit Risk

C.

Deposit Protection; Moral Hazard; Business Model; and LPHI Risk

D.

Business Model; Corporate Governance; Moral Hazard; and Deposit Protection

Question 16

According to the G-30 Study, the risk management infrastructure's funding must be

Options:

A.

determined by business-unit leaders

B.

determined at the Board level with inputs from business unit leaders

C.

determined at the Board level without influence by business unit leaders

D.

determined by the regulators

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Total 110 questions