8004 PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Question and Answers

Extreme exposure to foreign currency exposures and losses from non-US$ mortgages

Lawmakers postponed strenghtening regulatory oversight due to partisan infighting

Under-management and under-measurement of market and liquidity risk

They did not raise enough capital to weather the storm as the housing slump expanded

I, II and III only

I, III and IV only

I, II and IV only

All of these are expectations of the Organization as a Whole

At least 100 members live within 50 miles

A local business sponsors the chapter

Approved by the Board of Directors

All of the above

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

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

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

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

Volume growth at the expense of margin.

Excessive reliance on volatile trading income.

Banking is a "for-profit" business, not a means of fulfilling political goals.

A company culture where profits may justify "excesses."

30%

40%

50%

60%

relied almost entirely on Fortress Re's management team for information on the risks in its portfolio

relied on the information it received from other members of the reinsurance pool to manage its risks

had a full understanding from Fortress Re of the risks in the pool

had a full understanding from other members of the pool of the pool's liabilities

Vote in Board elections

Attend at least one PRMIA chapter meeting per year

Adhere to the PRMIA Standards of Best Practice, Conduct and Ethics

All of the above

Basis Risk

Currency Settlement

Interest Rate

Inflation

Political corruption and poor management

Over exposure to the property market

Rash guarantees given to investors in property linked funds

All of the above

only improve their PERSONAL professional competence

maintains and improve their professional competence and strive to maintain and improve the competence of other risk professionals

only possess the required skills and/or certification to complete the risk assessment / management work at hand

learn from a qualified risk management practitioner

Alerted senior management to the problems before the major losses occurred

Helped very little as Nick Leeson hid many trades

Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics

Been used if senior management had ever seen it

Bob Citron engaged in risky strategies to benefit personally

Bob Citron tried to "ride the yield curve"

Bob Citron heavily leveraged his positions using repos

Citron's losses were eventually exposed by massive margin calls