Question 1

For a bank a 1-year VaR of USD 10 million at 95% confidence level means that:

Options :

A : There is a 5% chance that the bank would lose less than USD 10 million in a year.

B : There is a 5% chance that the bank would lose more than USD 10 million in a year.

C : There is a 5% chance that the worst loss would be USD 10 million in a year.

D : There is a 5% chance that the least loss would be USD 10 million in a year.

Answer: B

Question 2

Bank customers traditionally trade commodity futures with banks in order to achieve which

of the following goals?

I. To express their own price views

II. To reverse undesired short-term exposure created from fixed commodity sales

III. To reach short-term budgetary targets

Options :

A : I

B : II

C : I, III

D : I, II, III

Answer: D

Question 3

Which one of the following four statements about economic capital of a bank is correct?

Options :

A : Economic capital measures how the economy is doing compared to the bank.

B :

Economic capital reflects the possible losses that could occur based on the bank-s own

estimates of the risks it is taking.

C : Economic capital is determined by rules imposed by an external authority.

D :

Economic capital is the present value of the earnings generated by the bank in the

future.

Answer: B

Question 4

Which among the following are shortfalls of the static liquidity ladder model?I. The static model gives a liquidity estimate only after the bank faces the liquidity problem.II. The static model can only make projections over a few days.III. The static model does not incorporate uncertainty in the analysis.

Options :

A : I, II

B : I, III

C : I, II, III

D : III

Answer: C

Question 5

Which one of the following four statements regarding the analysis of recoveries in operational risk reporting is correct?

Options :

A : Recoveries are usually driven by automated processes

B : Recovery analysts cannot be used to improve the recovery rate

C : Recovery analysis can demonstrate the importance of the operational risk function

D : The experience of personnel within the recovery team has no effect on the recovery rate

Answer: C