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PRMIA PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition Sample Questions:
1. A risk analyst peforming PCA wishes to explain 80% of the variance. The first orthogonal factor has a volatility of 100, and the second 40, and the third 30. Assume there are no other factors. Which of the factors will be included in the final analysis?
A) First, Second and Third
B) First and Second
C) First
D) Insufficient information to answer the question
2. Which of the following is a most complete measure of the liquidity gap facing a firm?
A) Residual liquidity gap
B) Marginal liquidity gap
C) Cumulative liquidity gap
D) Liquidity at Risk
3. If the 99% VaR of a portfolio is $82,000, what is the value of a single standard deviation move in the portfolio?
A) 50000
B) 82000
C) 35248
D) 134480
4. The CDS rate on a defaultable bond is approximated by which of the following expressions:
A) Loss given default x Default hazard rate
B) Hazard rate x Recovery rate
C) Credit spread x Loss given default
D) Hazard rate / (1 - Recovery rate)
5. Between two options positions with the same delta and based upon the same underlying, which would have a smaller VaR?
A) the position with a higher theta
B) the position with a lower gamma
C) both positions would have an identical VaR
D) the position with a higher gamma
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: A | Question # 3 Answer: C | Question # 4 Answer: A | Question # 5 Answer: D |





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