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PRMIA 8011 Certification Exam is a specialized exam designed to test the knowledge and skills of professionals in the credit and counterparty management field. Credit and Counterparty Manager (CCRM) Certificate Exam certification is offered by the Professional Risk Managers’ International Association (PRMIA), a leading professional association for risk management professionals worldwide. The PRMIA 8011 exam is designed for professionals who are involved in credit risk management, counterparty risk management, and financial analysis. Credit and Counterparty Manager (CCRM) Certificate Exam certification is widely recognized in the industry and is a valuable asset for professionals who want to advance their careers in the field of risk management.
The Professional Risk Managers’ International Association (PRMIA) is a non-profit organization dedicated to promoting best practices in risk management. One of PRMIA’s key offerings is its suite of certifications, which are recognized globally as a mark of excellence in the field of risk management. The PRMIA 8011 Credit and Counterparty Manager (CCRM) Certificate Exam is one of the most sought-after certifications in the industry, recognized as a benchmark of expertise in credit risk management and counterparty credit risk management.
To earn the PRMIA 8011 CCRM Certificate, candidates must pass a rigorous certification exam that tests their knowledge and skills in the area of credit and counterparty risk management. 8011 exam consists of 100 multiple-choice questions and must be completed within a three-hour time limit. Candidates who pass the exam are awarded the PRMIA 8011 CCRM Certificate, which is valid for three years. To maintain their certification, candidates must complete ongoing professional development activities and pass a recertification exam every three years.
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PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q85-Q90):
NEW QUESTION # 85
Which of the following statements is NOT true in relation to the recent financial crisis of 2007-08?
- A. The existence of central counterparties could have limited the damage caused by the financial crisis
- B. An intention to diversify from their core activities led all market participants to the same activities, which though appearing diversified at the bank's level, created a concentration risk at the systemic level
- C. Central banks had data on the interconnections between institutions, but poor understanding and analysis meant this data was never analyzed
- D. Counterparty risk was difficult to gauge as it was impossible to know who the counterparty's counterparties were
Answer: C
Explanation:
Counterparty risk was difficult to gauge as it was impossible to know who the counterparty's counterparties were - this is true as the chain of financial transactions became excessively long with no central transparency of who owed who what. Bank A's credit depended upon the health of its counterparties, whose health in turn depended upon other counterparties. Thus Choice 'd' is a correct statement.
In an attempt to diversify, banks became more like each other - chasing yield, they piled into securitized products, and chasing diversification, they piled into different types of securitized products. The system as a whole became susceptible to small shocks in the assets underlying this vast edifice of structured products.
Therefore Choice 'a' represents a correct statement.
Choice 'c' does not represent a correct statement. Central banks had little data on the interconnections between institutions. They were aware of the large volumes of OTC transactions, but had no data to figure out who was connected to who, and who had what kind of exposures.
Choice 'b' represents a correct statement. Most transactions, other than exchange cleared futures trades (which were a tiny fraction of all trades) were cleared on a bilateral basis. The existence of central counterparties (CCPs) could have limited the impact of the crisis significantly as market participants would not have lost trust in each other, and the 'collateral damage' that was witnessed from a fall in housing prices, and thereby mortgage assets, would have been more contained.
NEW QUESTION # 86
Which of the following statements is true?
I. Real Time Gross Systems (RTGS) for large value payments consume less system liquidity than Deferred Net Systems (DNS) II. The US Fedwire is an example of a Real Time Gross System III. Current disclosure requirements in relation to liquidity risk as laid down in the Basel framework require banks to disclose how liquidity stress scenarios were formulated IV. A CFP (Contingency Funding Plan) provides access to Central Bank financing
- A. I, II, III and IV
- B. II
- C. II and IV
- D. I and III
Answer: B
Explanation:
The correct answer is choice 'd'
For settlement of interbank payments, there are broadly two kinds of systems: RTGS (Real TimeGross Systems) and Deferred Net Systems (DNS). RTGS process payments in real time, settlement by settlement, and each transaction is settled by the a clearing institution (mostly the central bank) on a gross basis without regard for other settlements affecting the counterparty. DNS systems, on the other hand, allow for debiting or crediting the accounts of counterparties at periodic intervals after netting all payments paid or received since the last settlement. The exact timing of the payments does not matter so long as a bank has sufficient funding on a net basis at settlement time. Implicit in the DNS system is the extension of credit and liquidity by the central bank to the participating banks as it is possible for a bank to issue payment instructions even without having funds so long as they can arrange for such funds prior to settlement at the end of the day. In RTGS, a bank needs to have funds to make a payment at any point, and cannot make a payment against moneys expected to be received later intra-day. RTGS systems therefore need more liquidity on the part of the participants, and consume far more liquidity than DNS arrangements. Of course, the 'liquidity' of the DNS arrangement has a cost - which is that someone is taking up settlement risk, and invariably it is the central bank. If a bank under DNS fails to settle, its transactions have to be 'unwound', ie all payments made by it have to be rolled back. This can cause other banks to trip, causing further unwinding transactions. RTGS systems do not carry this risk. Therefore statement I is not correct as RTGS consume more liquidity than DNS arrangements.
Statement II is correct. US Fedwire or European TARGET are RTGS while CHIPS is a DNS based payment system.
Statement III is not correct. Current Basel requirements do not require any disclosure in respect of liquidity risk management. A consultative paper was issued by BIS in Dec 2009 for comments from members, but it is far from final. The BIS is still reacting to the liquidity issues that arose during the 2007-09 credit crisis.
Statement IV is not correct as a CFP is like a disaster recovery plan for liquidity, ie it helps a bank plan for and think about what steps would be taken to deal with a liquidity disaster situation. It does not provide any access to central bank financing.
NEW QUESTION # 87
Which of the following is the most important problem to solve for fitting a severity distribution for operational risk capital:
- A. The risk functional's minimization should lead to a good estimate of the 0.999 quantile
- B. The fit obtained should reduce the combination of the fitting and approximation errors to a minimum
- C. Empirical loss data needs to be extended to the ranges below the reporting threshold and above large value losses
- D. Determine plausible scenarios to fill the data gaps in the internal and external loss data
Answer: A
Explanation:
Ultimately, the objective of the operational risk severity estimation exercise is to calculate the99.9th percentile loss over a one year horizon; and everything else we do with data, collecting loss information, modeling, curve fitting etc revolves around this objective. If we cannot estimate the 99.9th percentile loss accurately, then not much else matters. Therefore Choice 'a' is the correct answer.
Minimizing the combination of fitting and approximation errors is one of the things we do with a view to better estimating the operational loss distribution. Likewise, empirical loss data generally is range bound because corporations do not require employees to log losses less than an threshold, and high value losses are generally rare. This problem is addressed by extrapolating both large and small losses, something that impacts the performance of our model. Likewise, one of the objectives of scenario analysis is to fill data gaps by generating plausible scenarios. Yet while all these are real issues to address, the primary problem we are trying to solve is estimating the 0.999th quantile.
NEW QUESTION # 88
An error by a third party service provider results in a loss to a client that the bank has to make up. Such as loss would be categorized per Basel II operational risk categories as:
- A. Outsourcing loss
- B. Execution delivery and process management
- C. Abnormal loss
- D. Business disruption and process failure
Answer: B
Explanation:
Choice 'a' is the correct answer. Refer to the detailed loss event type classification under Basel II (see Annex 9 of the accord). You should know the exact names of all loss event types, and examples of each.
NEW QUESTION # 89
Which of the following statements is true:
- A. Both total expected losses and total unexpected losses are less than the sum of expected and unexpected losses on underlying exposures respectively
- B. Total expected losses are equal to the sum of expected losses in the individual underlying exposures while total unexpected losses are less than the sum of unexpected losses on underlying exposures
- C. Total expected losses are equal to the sum of individual underlying exposures while total unexpected losses are greater than the sum of unexpected losses on underlying exposures
- D. Total expected losses are greater than the sum of individual underlying exposures while total unexpected losses are less than the sum of unexpected losses on underlying exposures
Answer: B
Explanation:
Total expected losses which are average and anticipated are equal to the sum of expected losses in the underlying exposures. Total unexpected losses, which are the excess of worst case losses at a certain confidence level over the expected losses, benefit from the diversification effect and are lower than the sum of unexpected losses of the underlying exposures. Therefore Choice 'c' is the correct answer. The other choices are incorrect.
NEW QUESTION # 90
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