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PRMIA 8011 CCRM Certificate exam is an essential certification for professionals who desire to work in the highly competitive field of risk management. The certificate offers a competitive advantage by providing candidates with a deep understanding of the latest techniques in credit and counterparty risk management. 8011 Exam equips candidates with the skills necessary to identify and evaluate risks associated with credit and counterparty transactions, enabling them to make informed decisions and contribute to the success of their organization.

PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q205-Q210):

NEW QUESTION # 205
Which of the following are true:
I. The total of the component VaRs for all components of a portfolio equals the portfolio VaR.
II. The total of the incremental VaRs for each position in a portfolio equals the portfolio VaR.
III. Marginal VaR and incremental VaR are identical for a $1 change in the portfolio.
IV. The VaR for individual components of a portfolio is sub-additive, ie the portfolio VaR is less than (or in extreme cases equal to) the sum of the individual VaRs.
V. The component VaR for individual components of a portfolio is sub-additive, ie the portfolio VaR is less than the sum of the individual component VaRs.

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

Answer: B

Explanation:
Statement I is true - component VaR for individual assets in the portfolio add up to the total VaR for the portfolio. This property makes component VaR extremely useful for risk disaggregation and allocation.
Stateent II is incorrect, the incremental VaRs for the positions in a portfolio do not add up to the portfolio VaR, in fact their sum would be greater.
Statement III is correct. Marginal VaR for an asset or position in the portfolio is by definition the change in the VaR as a result of a $1 change in that position. Incremental VaR is the change in the VaR for a portfolio from a new position added to the portfolio - and if that position is $1, it would be identical to the marginal VaR.
Statement IV is correct, VaR is sub-additive due to the diversification effect. Adding up the VaRs for all the positions in a portfolio will add up to more than the VaR for the portfolio as a whole (unless all the positions are 100% correlated, which effectively would mean they are all identical securities which means the portfolio has only one asset).
Statement V is in incorrect. As explained for Statement I above, component VaR adds up to the VaR for the portfolio.

NEW QUESTION # 206
Which of the following measures can be used to reduce settlement risks:

A. providing for physical delivery instead of netted cash settlements
B. increasing the timing differences between the two legs of the transaction
C. all of the above
D. escrow arrangements using a central clearing house

Answer: A

Explanation:
increasing the timing differences between the two legs of the transaction will increase settlement risk and not reduce it. Using escrow arrangements, such as central clearing houses to settle transactions (eg the DTCC in the United States) reduces settlement risk. Cash settlements based on netting arrangements reduce settlement risk, while physical delivery combined with gross cash payments increase it.
Therefore Choice 'a' is the correct answer.

NEW QUESTION # 207
A bank expects the error rate in transaction data entry for a particular business process to be 0.005%. What is the range of expected errors in a day within +/- 2 standard deviations if there are 2,000,000 such transactions each day?

A. 0 to 200 errors in a day
B. 90 to 110 errors in a day
C. 60 to 80 errors in a day
D. 80 to 120 errors in a day

Answer: D

Explanation:
Error rates are generally modeled using the Poisson distribution. Recall that the Poisson distribution has only one parameter -#- which is its mean and also its variance.
In the given case, the mean number of errors is 2,000,000 x 0.005% = 100. Since this is the variance as well, the standard deviation is #100 = 10. Therefore the range of outcomes within 2 standard deviations of the mean is 100 +/- (2*10) = 80 to 120 errors in a day.

NEW QUESTION # 208
The sensitivity (delta) of a portfolio to a single point move in the value of the S&P500 is $100. If the current level of the S&P500 is 2000, and has a one day volatility of 1%, what is the value-at-risk for this portfolio at the 99% confidence and a horizon of 10 days? What is this method of calculating VaR called?

A. $4,660, parametric VaR
B. $4,660, Monte Carlo simulation VaR
C. $14,736, parametric VaR
D. $14,736, historical simulation VaR

Answer: C

Explanation:
If the current level of the S&P 500 is 2000, and a single day volatility is 1%, and the delta (ie change in portfolio value from a one point change) is $100, then the 1 day volatility for the portfolio in dollars is 2000 *
1% * $100 = $2,000.
At the 99% confidence level, the value of the inverse cumulative density function for the normal distribution is 2.33 (=NORMSINV(99%), in Excel). Therefore the 1 day VaR will be 2.33 * $2000 = $4,660. Extending it to 10 days using the square root of time rule, we get the 10 day VaR as equal to SQRT(10)*4660 = $14,736.
Since this method of calculating VaR relies upon a delta approximation of a risk factor (in this case the S&P500), it is the parametric approach to calculating VaR (the other methods being historical simulation, and Monte Carlo simulation).
The 2015 Handbook provides an excellent example of parametric (and other) VaR calculations in Chapter 3 of Volume III of Book 3. The spreadsheet used for the illustration can be downloadedfrom
http://www.prmia.org/prm-exam/handbook-resources.

NEW QUESTION # 209
Which of the following was not a policy response introduced by Basel 2.5 in response to the globalfinancial crisis:

A. Comprehensive Risk Model (CRM)
B. Incremental Risk Charge (IRC)
C. Stressed VaR (SVaR)
D. Comprehensive Capital Analysis and Review (CCAR)

Answer: D

Explanation:
The CCAR is a supervisory mechanism adopted by the US Federal Reserve Bank to assess capital adequacy for bank holding companies it supervises. It was not a concept introduced by the international Basel framework.
The other three were indeed rules introduced by Basel 2.5, which was ultimately subsumed into Basel III.
Stressed VaR is just the standard 99%/10 day VaR, calculated with the assumption that relevant market factors are under stress.
The Incremental Risk Charge (IRC) is an estimate of default and migration risk of unsecuritized credit products in the trading book. (Though this may sound like a credit risk term, it relates to market risk - for example, a bond rated A being downgraded to BBB. In the old days, the banking book where loans to customers are held was the primary source of credit risk, but with OTC trading and complex products the trading book also now holds a good deal of credit risk. Both IRC and CRM account for these.) While IRC considers only non-securitized products, the CRM (Comprehensive Risk Model) considers securitized products such as tranches, CDOs, and correlation based instruments.
The IRC, SVaR and CRM complement standard VaR by covering risks that are not included in a standard VaR model. Their results are therefore added to the VaR for capital adequacy determination.

NEW QUESTION # 210
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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q205-Q210):

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