8010 Exam Dumps : Operational Risk Manager (ORM) Exam

Note that events of default under the ISDA MA are caused by one of the parties that is considered 'atfault'. In contrast, "termination events" are events for which no one is at fault, for example changes in legislation, illegality etc that still justify termination of the transactions under the contract.

The ISDA MA describes the following 8 types of events of default:

1. failure of pay or deliver

2. breach of agreement

credit support default

4. misrepresentation

5. default under specified transaction

6. cross default

7. bankruptcy

8. merger without assumption

All of the options presented in the question are events of default.

According to a paper by the BCBS, here is an excellent summary of what happened. Based on this, Choice 'c' is the correct answer.

"At the outset of the crisis, mortgage default shocks played a part in the deterioration of marketprices of collateralised debt obligations (CDOs). Simultaneously, these shocks revealed deficiencies in the models used to manage and price these products. The complexity and resulting lack of transparency led to uncertainty about the value of the underlying investment. Market participants then drastically scaled down their activity in the origination and distribution markets and liquidity disappeared. The standstill in the securitisation markets forced banks to warehouse loans that were intended to be soldin the secondary markets. Given a lack of transparency of the ultimate ownership of troubled investments, funding liquidity concerns were triggered within the banking sector as banks refused to provide sufficient funds to each other. This in turn led to the hoarding of liquidity, exacerbating further the funding pressures within the banking sector. The initial difficulties in subprime mortgages also fed through to a broader range of market instruments since the drying up of market and funding liquidity forced market participants to liquidate those positions which they could trade in order to scale back risk. An increase in risk aversion also led to a general flight to quality, an example of which was the high withdrawals by households from money market funds."

Statement I is correct. Retail Risk Based Pricing (RRBP) involves the use of borrower specific data (such as FICO scores, average balances etc) to arrive at credit decisions. These 'retail' credit decisions may include decisions on whether to grant a line of credit, a mortgage, issue a credit card, or any of the various other retail activities abank may be dealing with. At the same time, this data can also be used to price the product, in addition to providing a yes or no credit decision so that risky borrowers are charged more than less risky borrowers.

Statement II is not correct, because an integrated Risk Information Management Environment includes three elements - people, processes and technology (and not just people and processes).

Statement III is correct. An LDM is a blue print of an organization's data, and describes the relationships between the various data elements.

Statement IV is not correct because reference data and metadata are not the same thing. Reference data refers to relatively static data, such as customer name (while actual transactions may not be so static). Metadata refers to data about data, and is stored in a data dictionary.

Therefore Choice 'b' is the correct answer and the rest are incorrect.