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The CCRM exam covers a range of topics related to credit and counterparty risk management, including credit analysis, financial statement analysis, credit structuring and pricing, credit risk mitigation techniques, counterparty risk management, and regulatory requirements. 8011 Exam is designed to test the candidate's knowledge of these topics and their ability to apply this knowledge in practical situations.

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Professionals who earn the PRMIA 8011 certification have demonstrated their expertise in credit and counterparty risk management and have enhanced their professional credibility and marketability. Credit and Counterparty Manager (CCRM) Certificate Exam certification is widely recognized by leading financial institutions, including banks, asset managers, and insurance companies, and is considered a valuable asset for professionals who want to advance their careers in the field of risk management. If you are interested in pursuing a career in credit and counterparty risk management and want to enhance your skills and knowledge in this field, the PRMIA 8011 Certification Exam is an excellent credential to consider.

PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q198-Q203):

NEW QUESTION # 198
Which of the following statements are correct:
I. A training set is a set of data used to create a model, while a control set is a set of data is used to prove that the model actually works II. Cleansing, aggregating or ensuring data integrity is a task for the IT department, and is not a risk manager's responsibility III. Lack of information on the quality of underlying securities and assets was a major cause of the collapse in the CDO markets during the credit crisis that started in 2007 IV. The problem of lack of historical data can be addressed reasonably satisfactorily by using analytical approaches

A. II and IV
B. All of the above
C. I and III
D. I, III and IV

Answer: C

Explanation:
Statement I is correct. Data is often divided into two sets - a 'training set' that is used to create and fine-tune the model while the 'control set' is used to prove that the model works on sample data. Back testing is then perfomed using actual data that becomes available over time, or may already be available as historical data.
Statement II is incorrect. A risk manager often spends a great deal of time in managing data, and ensuring that the data being used is accurate enough for the purpose it is being used for. A risk manager can expect to spend a good part of his or her team's time in cleansing data. While he or she can try to get the IT processes and systems to produce correct data in the first place so it requires minimal subsequent cleansing or validation, this task is likely to remain a key part of a risk manager's role for quite some time in the future given the challenges nearly all organizations face in managing risk data.
Statement III is correct. There was not enough granular data available on the underlying components of some of the derivative debt securities whose markets dried up during the crisis that began in 2007. This was because investors became increasingly unsure of what the value of these securities, such as CDOs was, leading to market seizure and firesale prices.
Statement IV is not correct. There is no easy solution to the lack of enough historical data, which is used to create as well as test models, and construct stress scenarios. Analytical approaches are not a good enough substitute for real market data. During the recent crisis, many instruments had rather short histories and there was not enough data available, and risk managers and portfolio managers relied upon analytical approaches to value and price them. Many of the assumptions that underpinned these approaches were untested in the real world and turned out to be incorrect.
Therefore Choice 'c' is the correct answer and the rest are incorrect.

NEW QUESTION # 199
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. II and IV
B. I, II, III and IV
C. II
D. I and III

Answer: C

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 # 200
Which of the following statements are true:
I. Credit risk and counterparty risk are synonymous
II. Counterparty risk is the contingent risk from a counterparty's default in derivative transactions III. Counterparty risk is the risk of a loan default or the risk from moneys lent directly IV. The exposure at default is difficult to estimate for credit risk as it depends upon market movements

A. III and IV
B. II
C. I and II
D. II and III

Answer: B

Explanation:
Credit risk is the risk from a borrower defaulting on moneys lent. Counterparty risk, on the other hand, is the risk that a counterparty to a derivative transaction will be unable to pay at the time the transaction is in-the- money.
Credit risk therefore relates more to the banking book, counterparty risk relates more to the trading book.
Credit risk and counterparty risk differ in that for counterparty risk, the amount at risk fluctuates for counterparty risk depending upon the value of the underlying derivative. Counterparty risk generally starts at zero, for most swaps and other derivatives are near zero value at inception. Over time, as the prices of the underlying instruments move, one party ends up owing money to the other. A deterioration in the financial situation of the party owing moneys may lead to a loss to the other party, resulting in counterparty risk.
Counterparty risk can also arise from stock lending operations and repo trades.
Credit risk on the other hand is the traditional risk of default by a borrower, or a bank's customer who has taken a loan or has an overdraft or other credit facility.
Statement I is therefore incorrect as credit risk and counterparty risks are different.
Statement II is correct as counterparty risk is 'contingent' in the sense it arises only if the transaction with the counterparty ends up being in-the-money, and the counterparty defaults.
Statement III is incorrect. The statement describes credit risk.
Statement IV is incorrect, as the exposure is known for moneys lent. Derivative exposures for the future are difficult to estimate, they can even turn from moneys owed to moneys due as the value of the underlying changes.

NEW QUESTION # 201
Which of the following attributes of an investment are affected by changes in leverage:

A. Information ratio
B. Sharpe ratio
C. All of the above
D. risk and return

Answer: D

Explanation:
Explantion:
Changing leverage does not affect the Sharpe ratio or the Information ratio. However, leverage magnifies both risk and return. Therefore Choice 'b' is the correct answer.Recall that Sharpe ratio is the ratio of the excess returns (over the risk free rate) of an investment to its standard deviation, and the information ratio is the ratio of the 'alpha' returns to the standard deviation of such returns.

NEW QUESTION # 202
When compared to a medium severity medium frequency risk, the operational risk capital requirement for a high severity very low frequency risk is likely to be:

A. Unaffected by differences in frequency or severity
B. Zero
C. Higher
D. Lower

Answer: B

Explanation:
High frequency and low severity risks, for example the risks of fraud losses for a credit card issuer, may have high expected losses, but low unexpected losses. In other words, we can generally expect these losses to stay within a small expected and known range. The capital requirement will be the worst case losses at a given confidence level less expected losses, and in such cases this can be expected to be low.
On the other hand, medium severity medium frequency risks, such as the risks of unexpected legal claims, 'fat- finger' trading errors, will have low expected losses but a high level of unexpected losses. Thus the capital requirement for such risks will be high.
It is also worthwhile mentioning high severity and low frequency risks - for example a rogue trader circumventing all controls and bringing the bank down, or a terrorist strike or natural disaster creating other losses - will probably have zero expected losses & high unexpected losses but only at very high levels of confidence. In other words, operational risk capital is unlikely to provide for such events and these would lie in the part of the tail that is not covered by most levels of confidence when calculating operational risk capital.
Note that risk capital is required for only unexpected losses as expected losses are to be borne by P&L reserves. Therefore the operational risk capital requirements for a low severity high frequency risk is likely to be low when compared to other risks that are lower frequency but higher severity.
Thus Choice 'c' is the correct answer.

NEW QUESTION # 203
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