2025 Latest 8011 DUMPS Q&As with Explanations Verified & Correct Answers [Q48-Q63]

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2025 Latest 8011 DUMPS Q&As with Explanations Verified & Correct Answers

8011 dumps Exam Material with 330 Questions

The Professional Risk Managers International Association (PRMIA) is a global non-profit organization that focuses on promoting and facilitating the education, training, and certification of risk management professionals. One of the certification exams offered by PRMIA is the Credit and Counterparty Manager (CCRM) Certificate. Credit and Counterparty Manager (CCRM) Certificate Exam certification is designed to provide professionals with a comprehensive understanding of credit and counterparty risk management.

QUESTION 48
Which of the following statements is true in respect of a non financial manufacturing firm?
I. Market risk is not relevant to the manufacturing firm as it does not take proprietary positions II. The firm faces market risks as an externality which it must bear and has no control over III. Market risks can make a comparative assessment of profitability over time difficult IV. Market risks for a manufacturing firm are not directionally biased and do not increase the overall risk of the firm as they net to zero over a long term time horizon

III only

IV only

I and II

III and IV

A non-financial firm such as a manufacturing company faces market risks similar to those faced by financial firms, except perhaps for not being exposed to risks from the equity markets. Non financial firms commonly face interest rate risks in respect of their debts, commodity price risks in respect of their inputs and products, and foreign currency risks in respect of their overseas operations. It is therefore not correct to say that the manufacturing firm does not face market riskbecause it does not take proprietary positions. While decisions on positions may not be actively taken, positions in foreign exchange (eg, through overseas debtors owing foreign currency, or liabilities in foreign currencies to overseas suppliers), commodities (through exposure to the need for raw material and inventory of finished goods) and interest rates (through debt financed, whether at fixed or floating rates) exist and create market risk much in the same way as they would for a proprietary position. Therefore statement I is incorrect.
While the firm faces market risks as an externality (as do financial firms for that matter, though often they seek such exposure to profit from their view on which way the externality will express itself), it is incorrect to say that these risks must be borne. They can be measured and hedged. Therefore statement II is incorrect.
The results of a manufacturing firm will include gains and losses arising from exposure to market risk, and will cloud the true profitability of the business. A firm with significant unhedged overseas sales may show vastly different results across time periods due to the FX gains and losses, making comparative assessment of profitability difficult. Therefore statement III is correct.
Market risks for a manufacturing firm may be directionally biased in terms of exposure, ie there may be a consistent ‘long’ position in a particular commodity that the firm produces, and a consistent ‘short’ position in the commodities consumed. In the same way, directional biases may exist in FX or interest rate exposures too.
Regardless of the bias, the existence of market risk exposures increase the volatility of the income stream and make the firm more risky, even though the long term expected returns from such exposures is zero (ie, returns may be zero but standard deviation is not). Therefore statement IV is not correct as market risks form non financial firms do increase the overall risk of the firm.

QUESTION 49
Fill in the blank in the following sentence:
Principal component analysis (PCA) is a statistical tool to decompose a ____________ matrix into its principal components and is useful in risk management to reduce dimensions.

Covariance

Correlation

Volatility

Positive semi-definite

QUESTION 50
A bank holds a portfolio of corporate bonds. Corporate bond spreads widen, resulting in a loss of value for the portfolio. This loss arises due to:

Liquidity risk

Credit risk

Market risk

Counterparty risk

QUESTION 51
The unexpected loss for a credit portfolio at a given VaR estimate is defined as:

max(Actual Loss – Expected Loss, 0)

Actual Loss – Expected Loss

Actual Loss – VaR

VaR – Expected Loss

QUESTION 52
Which of the following risks were not covered in detail in most stress tests prior to the current crisis:
I. The behavior of complex structured products under stressed liquidity conditions II. Pipeline or securitization risk III. Basis risk in relation to hedging strategies IV. Counterparty credit risk
V. Contingent risks
VI. Funding liquidity risk

I, IV and VI

I, II, III, IV and VI

II, III and V

All of the above

QUESTION 53
Altman’s Z-score does not consider which of the following ratios:

Market capitalization to debt

Sales to total assets

Net income to total assets

Working capital to total assets

QUESTION 54
Which of the following is not true about the ISDA master agreement (ISDA MA):

All transactions under the ISDA MA are considered separate obligations

The ISDA MA describes the close out process

The CSA (Credit Support Annex) is one of the parts of the ISDA MA

The ISDA MA describes events of default, and termination events

QUESTION 55
A bank holds $10m of a corporate debt that it has purchased CDS protection against. What is the impact on the short term liquidity of the bank in the event of a default by the corporate on its bonds?

An immediate reduction in available liquidity

A short term increase in available liquidity

No impact

Cannot be determined without information on recovery rates

QUESTION 56
Which of the following is the most important problem to solve for fitting a severity distribution for operational risk capital:

The risk functional’s minimization should lead to a good estimate of the 0.999 quantile

Determine plausible scenarios to fill the data gaps in the internal and external loss data

Empirical loss data needs to be extended to the ranges below the reporting threshold and above large value losses

The fit obtained should reduce the combination of the fitting and approximation errors to a minimum

QUESTION 57
An investor holds a bond portfolio with three bonds with a modified duration of 5, 10 and 12 years respectively. The bonds are currently valued at $100, $120 and $150. If the daily volatility of interest rates is
2%, what is the 1-day VaR of the portfolio at a 95% confidence level?

115.51

163.11

370

165

QUESTION 58
Regulatory arbitrage refers to:

the practice of transferring business and profits to jurisdictions (such as those in other countries) to avoid or reduce capital adequacy requirements

the practice of structuring a financial institution’s business as a bank holding company to arbitrage the differing capital and credit rating requirements for different business lines

the practice of investing and financing decisions being driven by associated regulatory capital requirements as opposed to the true underlying economics of these decisions

All of the above

QUESTION 59
Which of the following statements is true in relation to the Supervisory Capital Assessment Program (SCAP):
I. The SCAP is an annual exercise conducted by the Treasury Department to determine the health of key financial institutions in the US economy II. The SCAP was essentially a stress test where the stress scenarios were specified by the regulators III. Capital buffers calculated under the SCAP represented the amount of capital that the institutions covered by SCAP held in excess of Basel II requirements IV. The SCAP focused on both total Tier 1 capital as well as Tier 1 common capital

I, II and IV

I and III

II and IV

I and III

QUESTION 60
Which of the following is closest to the description of a ‘risk functional’?

A risk functional is the distribution that models the severity of a risk

A risk functional is a model distribution that is an approximation of the true loss distribution of a risk

Risk functional refers to the Kolmogorov-Smirnov distance

A risk functional assigns a penalty value for the difference between a model distribution and a risk’s severity distribution

QUESTION 61
Which of the following correctly describes a reverse stress test:

Stress tests that start from a known stress test outcome and then ask what events could lead to such an outcome for the bank

A stress test that considers only qualitative factors that go beyond mathematical modeling to examine feedback loops and the effect of macro-economic fundamentals

Stress tests that are prescribed and conducted by a regulator in addition to the tests done by a bank

A stress test that requires a role reversal between risk managers and the risk taking business units in order to determine credible scenarios

QUESTION 62
Which of the following methods cannot be used to calculate Liquidity at Risk?

Monte Carlo simulation

Analytical or parametric approaches

Historical simulation

Scenario analysis

QUESTION 63
Which of the following statements are true:
I. Pre-settlement risk is the risk that one of the parties to a contract might default prior to the maturity date or expiry of the contract.
II. Pre-settlement risk can be partly mitigated by providing for early settlement in the agreements between the counterparties.
III. The current exposure from an OTC derivatives contract is equivalent to its current replacement value.
IV. Loan equivalent exposures are calculated even for exposures that are not loans as a practical matter for calculating credit risk exposure.

II and IV

III and IV

I, II, III and IV

II and III