According to the Group of 30 Report, option contracts:

• A.Usually create credit risk only for the seller (to default by the buyer)
• B.Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation
• C.Create no credit risk, since the buyer need not exercise the option
• D.Always generate credit risk to both counterparties

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Barings Bank and Orange County have many similarities. Which of the following is NOT a similarity?

• A.Both losses were eventually exposed by massive margin calls.
• B.Both traded in illiquid and obscure markets that were easy to manipulate.
• C.Both losses grew over time, but were not discovered by management until too late.
• D.Both relied on a star manger, supposedly in a low risk business.

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Which of the following best characterizes the problems that developed at Bankgesellschaft Berlin?

• A.A company culture where profits may justify "excesses."
• B.Banking is a "for-profit" business, not a means of fulfilling political goals.
• C.Volume growth at the expense of margin.
• D.Excessive reliance on volatile trading income.

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Zheng Zhu wants to open a new PRMIA Chapter in Wuhan, China. He can do this if:

• A.Approved by the Board of Directors
• B.At least 100 members live within 50 miles
• C.All of the above
• D.A local business sponsors the chapter

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Which of the following is part of the Group of 30 Report's market risk and stress testing recommendations?

• A.Market risk VaR measures should be multiplied by 3 to get to a stress test figure, as long as the VaR model has been back-tested
• B.To be consistent with regulatory capital measures, 10-day holding periods should be standardized for VaR reporting
• C.Stress tests should incorporate changes in liquidity
• D.Historic simulations are not effective methods of stress testing

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