PRIMIA Mock Test: Chapter 3

What is the main benefit of determining Risk Capacity?

A sensitivity stress test is a stress test that:

Match the following risk components to its attributes: 1. [[1]] : enabling the governing body to understand the level of risk that the firm's resources can tolerate; 2. [[2]] : detailed measurement, identification, and detailed cascade of the risk appetite 3. [[3]]: measurement of adequate return for risk 4. [[4]]: policing of risk appetite 5. [[5]]: calibration and expression of risk boundaries commensurate with the governing body's comfort level

Which elements of Risk Framework facilitate engagement of the entire organization

____________ is the ability to withstand the worst-case outcome that could arise from risk taking planned or already assumed

Primary importance of the bank:

Fundamental changes introduced as a result of 2008 liquidity crisis include:

This Key Resource represents the bottom line and protect and grow the capital base.

Elements of net earnings include:

IN categorizing the threats to Key Resources, Events with high frequency but relatively small impact, often referred to as 'expected loss' are referred to as Improbables .

Evensts of these nature are characterized by the AAA standard probability and cannot be avoided. The governing body will seek to balance the expense of carrying capital with the scale needed to absorb losses in this range. If a firm is able to emerge from such a crisis having survived unaided, its reputation, and that of its management will be enhanced

Which of the following is true about Stress Testing?

_____________ Model is historic data related to the performance of the asset class(es) or portfolio used to inform the model predictions of future behavior

Statistical Models need to consider the following assumptions

____________ Models is founded on applying expert knowledge of the underlying asset class(es) or portfolio and experience about past performance to build a specific impact assessment.

Key assumptions that need to be considered in Judgment based models include:

This method is an abstract concept, focusing upon one parameter or one part of a portfolio

This is the label assigned to stress tests designed to examine the correlations in the risk exposure of the firm, to analyze the impact of a material threat across multiple or all portfolios or processes.

__________________ simulation seeks to replicate a past extreme event and assess its impact on the current portfolio,

This type of stress test applies the methodologies to more than just the credit, market and operational risk attributes of the firm.

A firm-wide stress test involves making assumptions about the impact on:

This form of stress testing requires the identification of scenarios that could cause the failure of the business.

Which statements are true about Economic Capital ?

Which are options to determine the scale of risk capacity

Actions available to management and the governing body to align the strategy with risk capacity are: