2023 Best 8004 Exam Preparation Material with New Dumps Questions
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NEW QUESTION # 30
According to LTCM managers:
- A. Stress Testing was not necessary because their trades were hedged
- B. Stress Testing was not conducted
- C. Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations
- D. Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties
Answer: D
NEW QUESTION # 31
Taisei Fire and Marine Insurance Co
- A. relied almost entirely on Fortress Re's management team for information on the risks in its portfolio
- B. had a full understanding from other members of the pool of the pool's liabilities
- C. had a full understanding from Fortress Re of the risks in the pool
- D. relied on the information it received from other members of the reinsurance pool to manage its risks
Answer: A
NEW QUESTION # 32
According to the Group of 30 Report, important risks associated with dynamic hedging are:
- A. Greater volatility than expected over the life of an option
- B. Both A and B
- C. Sudden gaps in market prices
- D. Neither A nor B
Answer: B
NEW QUESTION # 33
When local rules and regulations conflict with the PRMIA Standards of Best Practice, Conduct and Ethics the PRMIA member should ...
- A. Ignore local rules and regulations
- B. Seek advice from a qualified party, being mindful of legal and confidentiality requirements
- C. Modify the interpretation of local rules and regulations to meet the situation
- D. Respect local rules and regulations
Answer: B
NEW QUESTION # 34
The Bankers Trust Case Study is about:
- A. reliance on thinly traded derivatives to hedge
- B. failure to guard its clients' best interests
- C. overexposure to the real estate market
- D. large losses at the proprietary trading desk
Answer: B
NEW QUESTION # 35
When describing the reasons for the collapse of China Aviation Oil, which of the following was not cited?
- A. Senior management in China were aware of the positions but did not understand the complexities of risk managing them
- B. Time value was not taken into account during the contract valuation process
- C. Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses
- D. No properly defined risk management policies in place and general lack of oversight by senior management
Answer: A
NEW QUESTION # 36
The steps which the US Treasury Department and the Federal Reserve took in July 2008 to boost confidence in both Fannie Mae and Freddie Mac did not include which one of the following:
- A. Access to the Federal Reserve discount window
- B. Removing the prohibition on the Treasury Department to buy both companies stock
- C. Restricting the sale of new Fannie Mae and Freddie Mac securities only to US citizens
- D. Reiterating their belief that both companies played a central role in the US housing finance system
Answer: D
NEW QUESTION # 37
Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?
- A. Complex derivative trades based on volatility indices.
- B. Deposit taking activities which generated net interest income.
- C. The provision of fee based services to its customers.
- D. Lending to consumers and small businesses.
Answer: A
NEW QUESTION # 38
The retrocession insurance cover was provided by
- A. The Fortress Re reinsurers only
- B. Fortress Re and their reinsurers
- C. Fortress Re and other insurers
- D. The fronting insurance companies
Answer: A
NEW QUESTION # 39
TMFI's internal procedures and management were
- A. absolutely unaware of their uninsured liabilities
- B. aware that they had some uninsured liabilities but thought they had enough capital to withstand any uninsured losses
- C. None of the above
- D. fully aware of the uninsured risks Fortress Re were taking
Answer: A
NEW QUESTION # 40
According to the Northern Rock Case Study, what is Forced Insolvency?
- A. The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)
- B. The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital
- C. The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors
- D. The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors
Answer: A
NEW QUESTION # 41
The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:
- A. Backwardation
- B. Reverse backwardation
- C. Contango
- D. Conchacha
Answer: A
NEW QUESTION # 42
As a result of the US government's intervention, which of the following is true?
- A. Foreign Central Banks will continue to sell their holdings of Fannie Mae and Freddie Mac securities
- B. The systemic risks still remain in the housing market because it increases the US government's debt
- C. The cost of borrowing for house buyers will rise because of the risk premium now built into the cost of such a government guarantee
- D. The cost of borrowing for Fannie Mae and Freddie Mac should decline because the government will be standing behind their debts and the buying and selling of mortgage debt will continue
Answer: D
NEW QUESTION # 43
A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:
- A. Report the findings immediately to authorities
- B. Respect the client's confidentiality as that takes precedence
- C. Approach the client about the concern, regardless of what their reaction might be
- D. Report this conduct to their immediate supervisor
Answer: D
NEW QUESTION # 44
The key people involved in the application of good governance and risk management must:
I be trustworthy
II be honest
III be approved by the local regulator
IV treat others fairly at all times
- A. I, II, and IV only
- B. I, II, and III only
- C. III only
- D. I, II, III and IV above
Answer: A
NEW QUESTION # 45
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