Practice 8009 Exam Online

Question 1

When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?

A : Only a few months previously it had reported record profits.

B : The quality of its' assets was never in question.

C : For many years it was regarded as a star-performer in the financial markets.

D : Its' loan loss record was poor by industry standards.

Answer: D

Question 2

When describing the reasons for the collapse of China Aviation Oil, which of the following was not cited?

A : No properly defined risk management policies in place and general lack of oversight by senior management

B : Time value was not taken into account during the contract valuation process

C : Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses

D : Senior management in China were aware of the positions but did not understand the complexities of risk managing them

Answer: D

Question 3

A risk manager has just completed a risk assessment project. The report has been given to the risk manager's direct supervisor, who refuses to escalate the material issues raised in the report. Further, the direct supervisor edits the report to remove the section describing the material risk, who then submits it to the firm's Executive Committee.

According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), which of the following actions is most appropriate:

A : The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done

B : The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee

C : Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization

D : If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO

Answer: B

Question 4

According to LTCM managers:

A : Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties

B : Stress Testing was not conducted

C :

Stress Testing was not necessary because their trades were hedged

D : Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations

Answer: A

Question 5

Which of the following was a key problem in the Barings Bank case?

A : Having the back office and front office operations under the same person

B : Difference in the contract sizes in the OSE and SIMEX

C : The different time zones that the office was trading in

D : Leeson was executing an arbitrage strategy even though he was not authorized to do so

Answer: A

Name:	Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition
Exam Code:	8009
Certification:	PRM
Vendor:	PRMIA
Total Questions:	113
Last Updated:	Apr 25, 2024

PRMIA 8009