Free PRMIA 8010 Exam Dumps Questions & Answers

The principle underlying the contingent claims approach to measuring credit risk equates the cost of eliminating credit risk for a firm to be equal to:

• A.the value of a put on the firm's assets with a strike equal to the value of the debt
• B.the cost of a call on thefirm's assets with a strike equal to the value of the debt
• C.the probability of the firm's assets falling below the critical value for default
• D.the market valuationof the firm's equity less the value of its liabilities

A bullet bond and an amortizing loan are issued at the same time with the same maturity and with the same principal. Which of these would have a greater credit exposure halfway through their life?

• A.The amortizing loan
• B.The bullet bond
• C.They would have identical exposure half way through their lives
• D.Indeterminate with the given information

Which of the following represents a riskier exposure for a bank: A LIBOR based loan, or an Overnight Indexed Swap? Which of the two rates is expected to be higher?
Assume the same counterparty and the same notional.

• A.A LIBOR based loan; LIBOR rate will be higher
• B.Overnight Index Swap; LIBOR rate will be higher
• C.Overnight Index Swap; OIS rate will be higher
• D.A LIBOR based loan; OIS rate will be higher

The generalized Pareto distribution, when used in the context of operational risk, is used to model:

• A.Average losses
• B.Tail events
• C.Unexpected losses
• D.Expected losses

Under the contingent claims approach to measuring credit risk, which of the following factors does NOT affect credit risk:

• A.Volatility of the firm's asset values
• B.Leverage in the capital structure
• C.Maturity of the debt
• D.Cash flows of the firm