PRM III Study notes

rainer.behrens
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Joined: Mon Jul 20, 2015 9:29 am

PRM III Study notes

Postby rainer.behrens » Tue Mar 01, 2016 5:16 pm

Would you be as kind as to post the solutions to questions of CREDIT RISK study notes
Chapter 9: Credit Risk and Counterparty Risk and
Chapter 10: CVA related expects - Towards XVA?

edupristine
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Re: PRM III Study notes

Postby edupristine » Sat Mar 12, 2016 11:47 am

Hi Rainer
The answer is on ppt but if you don't find it there then,Please drop your email id so we will revert you back on the same with relevant attachment.

rainer.behrens
Posts: 5
Joined: Mon Jul 20, 2015 9:29 am

Re: PRM III Study notes

Postby rainer.behrens » Sun Mar 13, 2016 9:41 am

Hi

sorry but I can't find the solutions on ppt.

Thanks

Rainer
Last edited by rainer.behrens on Wed Mar 16, 2016 5:56 pm, edited 3 times in total.

edupristine
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Re: PRM III Study notes

Postby edupristine » Wed Mar 16, 2016 11:25 am

Hi Rainer

these are some questions and answer of them from Chapter 10 CVA related expects - Towards XVA?

Q 1.Which of the below statement is true under current market scenario?
a.Cash-flow projections should be made based on OIS rate.
b.Un-secured funding is calculated as OIS + basis
c.Secured funding under CSA agreement is generally at OIS rate.
d.LIBOR is best approximation to risk-free rate.
Answer: Secured funding under CSA agreement is generally at OIS rate

Q.2 Which of the below ratio is used under Basel III to put control over long-term liquidity requirement?
a. Leverage Ratio
b. Liquidity Coverage Ratio
c. Earning to Price Ratio
d. Net Stable Funding Ratio
Answer: Net Stable Funding Ratio

rainer.behrens
Posts: 5
Joined: Mon Jul 20, 2015 9:29 am

Re: PRM III Study notes

Postby rainer.behrens » Wed Mar 16, 2016 5:31 pm

Hi,

thanks a lot.

But I also asked for the answers to questions of CREDIT RISK study notes Chapter 9: Credit Risk and Counterparty Risk
Why didn't you post the answers to these questions?

Would you be as kind as to give me these answers?

On friday I sit for the exam ...

Best regards

Rainer

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: PRM III Study notes

Postby edupristine » Fri Mar 18, 2016 12:59 pm

Hi Rainer

Here are some Questions and Answers of them from Chapter 9. Credit Risk & Counterparty Risk.

1. James working in the Credit Risk Management division of leading investment Bank ABC wanted to stimulate Expected Exposure for the calculation of CVA. Which of the below decision taken by him will not increase the accuracy?
A. Increase in no. of period in stimulation process.
B. Increase in no. of grid point.
C. Double the no. stimulations.
D. Calibrate the stimulation model using Market implied data.
Answer: A. Increase in no. of period in stimulation process.

2. Which of the below statement is least accurate about the calculation of Expected Exposure for CVA calculation?
A. Illiquid trades require more no. of grid points for accurate calculation.
B. It is always better to have larger no. of stimulations and grid points.
C. Historical data for model calibration could lead to model arbitrage.
D. No. of stimulation used for simple swap instruments ranges from 5000 to 10000.
Answer: B. It is always better to have larger no. of stimulations and grid points.

3. Which of the following is true about the BVA calculation?
A. CVA have been recently used as a part of FVA calculation.
B. DVA increase increases the value of firm.
C. For exact calculation of BVA its safe to assume CVA and DVA part are independent of each other and difference between UCVA and UDVA give BVA.
D. Decrease in BVA increases firms reported profitability.
Answer: C. For exact calculation of BVA its safe to assume CVA and DVA part are independent of each other and difference between UCVA and UDVA give BVA
4. Which of the following statement is correct about Credit Value Adjustment, CVA ?
A. CVA could be defined as difference between Risky Value of Derivative and Value of derivative without considering any market risk.
B. Increase in Probability of Default of a bank will lead to increase in CVA cost incurred by it.
C. As the Recovery Rate increases CVA cost decreases.
D. While calculating Expected Exposure greater value of negative exposure will lead to increase in CVA cost.
Answer: A. CVA could be defined as difference between Risky Value of Derivative and Value of derivative without considering any market risk.


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