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Latest 8011 Test Preparation | New 8011 Exam Bootcamp

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PRMIA 8011 (Credit and Counterparty Manager (CCRM) Certificate) Exam is a globally recognized certification that demonstrates a professional's expertise in managing credit and counterparty risk. 8011 Exam evaluates a candidate's knowledge of principles, practices, and regulations in credit risk management, counterparty risk management, and credit derivatives.

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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q105-Q110):

NEW QUESTION # 105
A cumulative accuracy plot:

A. is a measure of the correctness of VaR calculations
B. measures rating accuracy
C. measures the accuracy of credit risk estimates
D. measures accuracy of default probabilities observed empirically

Answer: B

Explanation:
A cumulative accuracy plot measures the accuracy of credit ratings assigned by rating agencies by considering the relative rankings of obligors according to the ratings given. Choice 'd' is the correct answer.

NEW QUESTION # 106
For a FX forward contract, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)

A. At maturity
B. Roughly three-quarters of the way towards maturity
C. Indeterminate from the given information
D. Right after inception

Answer: A

Explanation:
With the passage of time, the range of possible values the FX contract can take increases. Therefore the maximum value of the contract, which is when the credit risk would be maximum, would be at maturity.
(Note that this is different than an interest rate swap whose value at maturity approaches zero.) Therefore Choice 'a' is the correct answer and the others are incorrect.

NEW QUESTION # 107
Which of the following statements is true:
I. If the sum of its parameters is less than one, GARCH is a mean reverting model of volatility, while EWMA is never mean reverting II. Standardized returns under both EWMA and GARCH show less non-normality than non standardized returns III. Steady state variance under GARCH is affected only by the persistence coefficient IV. Good risk measures are always sub-additive

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

Answer: D

Explanation:
GARCH is a mean reverting model of volatility, with a steady state mean that the model reverts to in the absence of market shocks. EWMA is not mean reverting and volatility under EWMA stays constant in the absence of shocks. Therefore statement I is correct.
Both EWMA and GARCH models are designed to address volatility clustering, which explainsmuch of the non-normality of returns. When returns are standardized to the volatility calculations under either of these methods, the returns appear far closer to the normal distribution than non-standardized returns. (If it were not to, then there would have been no point in using these techniques.) Statement II is correct.
Steady state variance under GARCH is defined as # / (1 - # - #), where # and # are the two parameters (called the reaction and persistence coefficient respectively). Clearly, it is affected by more than just the persistence coefficient, therefore statement III is not correct.
Sub-additivity is a very desired property in risk measures. It implies the sum of the parts is greater than the whole. In the case of risk measures, the whole is smaller than the sum of the parts due to diversification.
Statement IV is true.
Therefore the correct answer is Choice 'c'

NEW QUESTION # 108
The 99% 10-day VaR for a bank is $200mm. The average VaR for the past 60 days is $250mm, and the bank specific regulatory multiplier is 3. What is the bank's basic VaR based market risk capital charge?

A. $600mm
B. $750mm
C. $250mm
D. $200mm

Answer: B

Explanation:
The current Basel rules for the basic VaR based charge for market risk capital set market risk capital requirements as the maximum of the following two amounts:
1. 99%/10-day VaR,
2. Regulatory Multiplier x Average 99%/10-day VaR of the past 60 days
The 'regulatory multiplier' is a number between 3 and 4 (inclusive) calculated based on the number of 1% VaR exceedances in the previous 250 days, as determined by backtesting.
- If the number of exceedances is <= 4, then the regulatory multiplier is 3.
- If the number of exceedances is between 5 and 9, then the multiplier = 3 + 0.2*(N-4), where N is the number of exceedances.
- If the number of exceedances is >=10, then the multiplier is 4.
So you can see that in most normal situations the risk capital requirement will be dictated by the multiplier and the prior 60-day average VaR, because the product of these two will almost often be greater than the current 99% VaR.
The correct answer therefore is = max(200mm, 3*250mm) = $750mm.
Interestingly, also note that a 99% VaR should statistically be exceeded 1%*250 days = 2.5 times,which means if the bank's VaR model is performing as it should, it will still need to use a reg multiplier of 3.

NEW QUESTION # 109
There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the two?

A. 0%
B. 40%
C. 100%
D. 25%

Answer: D

Explanation:
Probability of the joint default of both A and B =
A math equation with black text Description automatically generated

We know all the numbers except default correlation, and we can solve for it.
Default Correlation*SQRT(0.03*(1 - 0.03)*0.08*(1 - 0.08)) + 0.03*0.08 = 0.014.
Solving, we get default correlation = 25%

NEW QUESTION # 110
......

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