[Oct 12, 2023] 100% Real & Accurate 8004 Questions with Free and Fast Updates
Self-Study Guide for Becoming an PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Expert
NEW QUESTION # 49
What was the main risk scenario on the Metallgesellschaft trading strategy?
- A. The short-term price of the underlying being higher than the long-run contract
- B. The final price of the underlying being higher than the initial price
- C. The initial price of the underlying being higher than the final price
- D. Realized losses on short-term contracts against unrealized gains on the long-run contract
Answer: D
NEW QUESTION # 50
Which of the following was not considered to be a positive outcome of the Northern Rock Case Study?
- A. The role of the UK government and the possible underwriting of risks by tax-payers, and the general question of Moral Hazard
- B. The original successful business model had not stress tested sufficiently for the incidence of Low Probability, High Impact incidents
- C. It emphasised the importance of effective governance arrangements within financial firms
- D. The reform of the Deposit Protection Scheme because of its internal inconsistencies
Answer: B
NEW QUESTION # 51
The problems in the Orange County case can best be characterized as failures related to:
- A. Market Risk
- B. Credit Risk
- C. Operational and Regulatory Compliance Risk
- D. All of the Above
Answer: A
NEW QUESTION # 52
PwC concluded that the accounting policy adopted by China Aviation Oil was incorrect because it
- A. used neither the intrinsic value nor the time value
- B. took into account both the intrinsic value and the time value
- C. only regarded the intrinsic value (i.e. the difference between the strike price and the forward price of the underlying commodity) as the fair value of its options
- D. only took into account the time value of the option (which includes recognizing the time left to maturity of the option, the volatility of the spot price of the underlying commodity, interest rates and other factors)
Answer: C
NEW QUESTION # 53
Which of the following was not received by Northern Rock as official support from the UK banking and government authorities?
- A. A covert money market support operation designed to cover up the difficulties Northern Rock was facing
- B. The UK government offered to guarantee all existing and new retail deposits, and to most other creditors
- C. The Bank of England's role as Lender-Of-Last-resort was activated at a penalty interest rate of 150 basis points above the Bank Rate
- D. The Bank of England provided an additional unlimited facility secured on the collateral of all Northern Rock assets
Answer: A
NEW QUESTION # 54
Barings Bank and Orange County have many similarities. Which of the following is NOT a similarity?
- A. Both traded in illiquid and obscure markets that were easy to manipulate.
- B. Both relied on a star manger, supposedly in a low risk business.
- C. Both losses grew over time, but were not discovered by management until too late.
- D. Both losses were eventually exposed by massive margin calls.
Answer: A
NEW QUESTION # 55
A VaR model for managing market risk at Barings Bank in London would most likely have:
- A. Alerted senior management to the problems before the major losses occurred
- B. Helped very little as Nick Leeson hid many trades
- C. Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics
- D. Been used if senior management had ever seen it
Answer: B
NEW QUESTION # 56
The early 2003 trading strategy of China Aviation oil was
- A. to sell puts and buy calls
- B. to sell calls and buy puts
- C. to buy puts and sell calls
- D. to buy calls and sell puts
Answer: D
NEW QUESTION # 57
The Fortress Re finite reinsurance model
- A. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
- B. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid annual premiums to cover these policies, and as the risks were spread out over the year the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
- C. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the future premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
- D. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, but as the risks were spread out over time the future premiums were not accounted for as current liabilities on the books of the pool members, thus giving a false impression of profitability
Answer: D
NEW QUESTION # 58
The failure of Washington Mutual was NOT due to which one of the following?
- A. Using a combination of subprime mortgage loans and credit cards
- B. A run on its deposits by bank customers
- C. It failed due to the poor quality of its assets
- D. Low lending standards and bad quality acquisitions
Answer: B
NEW QUESTION # 59
Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I.competitive market conditions
II.ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders
III.ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators
IV.reporting all such personnel to the local regulator
- A. II, III and IV only
- B. I, II and IV only
- C. All of the above
- D. I and II only
Answer: D
NEW QUESTION # 60
As LTCM started to have major losses, it compounded its problems by doing what?
- A. Trying to borrow more money from major money centre banks
- B. Issuing Subordinated Debt
- C. Unwinding its' more liquid trades thereby creating more liquidity risk overall
- D. Returning capital to the general partners before others
Answer: C
NEW QUESTION # 61
When supervising others, a PRMIA member must comply with
- A. local regulatory authority standards which may be less onerous than PRMIA standards
- B. his / her established personal standards of work approved in previous work situations
- C. PRMIA Standards
- D. the standards of the organization where the work is being performed
Answer: C
NEW QUESTION # 62
When describing the reasons for the collapse of China Aviation Oil, which of the following was not cited?
- A. No properly defined risk management policies in place and general lack of oversight by senior management
- B. Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses
- C. Time value was not taken into account during the contract valuation process
- D. Senior management in China were aware of the positions but did not understand the complexities of risk managing them
Answer: D
NEW QUESTION # 63
Which of the following is NOT part of the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct) Guidance on Ethical Behavior?
- A. Respect local customs
- B. Take responsibility for your work
- C. Ensure globally accepted standards are adhered to at all costs
- D. Respect local laws and regulations
Answer: C
NEW QUESTION # 64
Which of the following is FALSE?
- A. SIMEX made inquiries to Barings Bank about large margin calls on its positions
- B. Nick Leeson claimed to be running an arbitrage book
- C. Nick Leeson dealt in complex derivatives lacking transparency of pricing
- D. Nick Leeson also ran the back office for his trading area
Answer: C
NEW QUESTION # 65
According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?
- A. selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- B. selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- C. selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- D. selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
Answer: C
NEW QUESTION # 66
Several clients, including Procter and Gamble took legal action against Bankers Trust, claiming Bankers Trust
- A. hid profits
- B. was involved in accounting fraud
- C. did not honour its contractual obligations to pay
- D. sold them derivative products without properly advising them of the relevant risks
Answer: D
NEW QUESTION # 67
The Fortress Re accounting risk transfer procedures
- A. made it difficult for TFMI to determine whether risk had actually been transferred and whether it had sufficient catastrophe insurance cover
- B. made it straightforward for TFMI to determine whether risk had actually been transferred and they decided not to take out more catastrophe insurance cover
- C. made it straightforward for TFMI to determine when the risk had been transferred and to take out additional catastrophe insurance cover
- D. made it difficult for TFMI to determine whether risk had actually been transferred so they had to take out additional catastrophe insurance cover
Answer: A
NEW QUESTION # 68
For the sentence
"The organization should have at its disposal employees who have adequate _________, ________ and _______ to perform the tasks assigned to them", Choose the correct combination of words from the following options:
- A. track record, expertise, skills
- B. risk appetite, knowledge, expertise
- C. experience, skills, previous successes
- D. knowledge, skills, expertise
Answer: D
NEW QUESTION # 69
Which of the following regarding Orange County is FALSE?
- A. Bob Citron heavily leveraged his positions using repos
- B. Citron's losses were eventually exposed by massive margin calls
- C. Bob Citron tried to "ride the yield curve"
- D. Bob Citron engaged in risky strategies to benefit personally
Answer: D
NEW QUESTION # 70
Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:
- A. 34 of all Members
- B. The Board of Directors alone
- C. The Board of Directors and a majority of the Members
- D. The Board of Directors, but only if the Blue Ribbon Panel affirms the change
Answer: C
NEW QUESTION # 71
......
8004 Study Guide Realistic Verified 8004 Dumps: https://www.itcertmagic.com/PRMIA/real-8004-exam-prep-dumps.html
8004 Questions & Practice Test are Available On-Demand: https://drive.google.com/open?id=1BGvuqDLBMtXuHnTm1tEWDoH-dycnROGn