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NEW QUESTION # 35
What was the most important loss for Bankers Trust?
- A. Time spent on legal proceedings in courts
- B. Money due to unfavourable market moves
- C. Loss of market share due to their licenses being revoked
- D. Loss of its' reputation due to actions seen as detrimental to their clients
Answer: D
NEW QUESTION # 36
The problems which initiated the crisis at Northern Rock during the summer of 2007 were:
- A. A general lack of confidence in mortgage backed securities associated in large part with developments in the US sub-prime mortgage market, and doubts emerging about the viability of the Northern Rock business model
- B. Large customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent
- C. Doubts arising about the viability of the business model which necessitated Bank of England intervention
- D. A depositor run on the bank, following doubts about the viability of the Northern Rock business model
Answer: A
NEW QUESTION # 37
Metallgesellschaft's retail contracts were
- A. hedged using exchange-traded futures with shorter maturities than the retail contracts
- B. hedged using exchange-traded futures with longer maturities than the retail contracts
- C. fully hedged using exchange-traded futures of the same maturities as the retail contracts
- D. unhedged
Answer: A
NEW QUESTION # 38
The problems at Bankgesellschaft Berlin can best be characterized as failures related to:
- A. Both B and C
- B. Credit Risk
- C. Operational Risk
- D. Market Risk
Answer: A
NEW QUESTION # 39
The hedging strategy employed by MG Refining & Marketing has been called:
- A. Dynamic hedging
- B. A differential hedge
- C. Nothing because MG Refining & Marketing did not hedge its position
- D. A stacked hedge
Answer: D
NEW QUESTION # 40
With a PRMIA member's need to reconcile their internal and external responsibility to perform their work in an independent and appropriate fiduciary manner, which of the following options must be taken into consideration when performing risk management duties?
- A. Internal controls, and the expectations of stakeholders, shareholders, and the general public
- B. Only the internal controls and compliance standards
- C. Internal controls of the organization, and the local regulator
- D. The local regulator, internal controls, and shareholders
Answer: A
NEW QUESTION # 41
Which of the following is part of the Group of 30 Report's market risk and stress testing recommendations?
- A. Market risk VaR measures should be multiplied by 3 to get to a stress test figure, as long as the VaR model has been back-tested
- B. Stress tests should incorporate changes in liquidity
- C. To be consistent with regulatory capital measures, 10-day holding periods should be standardized for VaR reporting
- D. Historic simulations are not effective methods of stress testing
Answer: B
NEW QUESTION # 42
When local rules and regulations conflict with the PRMIA Standards of Best Practice, Conduct and Ethics the PRMIA member should ...
- A. Seek advice from a qualified party, being mindful of legal and confidentiality requirements
- B. Modify the interpretation of local rules and regulations to meet the situation
- C. Ignore local rules and regulations
- D. Respect local rules and regulations
Answer: A
NEW QUESTION # 43
Which of the following was a key problem in the Barings Bank case?
- A. The different time zones that the office was trading in
- B. Leeson was executing an arbitrage strategy even though he was not authorized to do so
- C. Having the back office and front office operations under the same person
- D. Difference in the contract sizes in the OSE and SIMEX
Answer: C
NEW QUESTION # 44
The early 2003 trading strategy of China Aviation oil was
- A. to buy puts and sell calls
- B. to buy calls and sell puts
- C. to sell puts and buy calls
- D. to sell calls and buy puts
Answer: B
NEW QUESTION # 45
Which of the following best characterizes the problems that developed at Bankgesellschaft Berlin?
- A. A company culture where profits may justify "excesses."
- B. Excessive reliance on volatile trading income.
- C. Volume growth at the expense of margin.
- D. Banking is a "for-profit" business, not a means of fulfilling political goals.
Answer: D
NEW QUESTION # 46
The problems at Bankers Trust can best be characterized as failures related to:
- A. Operational and Regulatory Compliance Risk
- B. All of the Above
- C. Credit Risk
- D. Market Risk
Answer: A
NEW QUESTION # 47
A VaR model for managing market risk at Barings Bank in London would most likely have:
- A. Been used if senior management had ever seen it
- B. Alerted senior management to the problems before the major losses occurred
- C. Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics
- D. Helped very little as Nick Leeson hid many trades
Answer: D
NEW QUESTION # 48
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. fully aware of the uninsured risks Fortress Re were taking
- D. None of the above
Answer: A
NEW QUESTION # 49
Which of the following should NOT be part of the Risk Management Infrastructure?
- A. Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms
- B. Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting
- C. Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole
- D. Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader
Answer: C
NEW QUESTION # 50
Which of the following would have contributed to noticing and preventing Leeson's violations at Barings?
- A. Recognition that large profits can be an indicator of higher risk
- B. All of the above
- C. More senior level involvement at Barings regarding use of derivatives
- D. Separation of front and back offices
Answer: B
NEW QUESTION # 51
The early 2003 trading strategy of China Aviation oil was
- A. to buy puts and sell calls
- B. to buy calls and sell puts
- C. to sell puts and buy calls
- D. to sell calls and buy puts
Answer: B
NEW QUESTION # 52
Which of the following was NOT a factor in the WorldCom collapse?
- A. Accounting abuses
- B. Unfair pricing to customers
- C. Over stating actual sales
- D. Failed corporate governance
Answer: B
NEW QUESTION # 53
The sensitivity analysis required under IFRS would have done what for China Aviation Oil?
- A. None of the above
- B. Provided investors and analysts with insight into the dynamics of value changes, and the sensitivity of fair value to the underlying drivers of interest rates, exchange rates, and commodity prices
- C. Only provided the intrinsic value of its outstanding option positions
- D. Only provided the time value of its outstanding option position
Answer: B
NEW QUESTION # 54
What is (are) the lesson(s) of the Barings' failure?
- A. All of the above
- B. Front and back offices need to be independent
- C. Incentive plans have risk management implications
- D. Large profits can be an indicator of risk
Answer: A
NEW QUESTION # 55
When local rules and regulations conflict with the PRMIA Standards of Best Practice, Conduct and Ethics the PRMIA member should ...
- A. Seek advice from a qualified party, being mindful of legal and confidentiality requirements
- B. Modify the interpretation of local rules and regulations to meet the situation
- C. Ignore local rules and regulations
- D. Respect local rules and regulations
Answer: A
NEW QUESTION # 56
What was the most important loss for Bankers Trust?
- A. Time spent on legal proceedings in courts
- B. Money due to unfavourable market moves
- C. Loss of market share due to their licenses being revoked
- D. Loss of its' reputation due to actions seen as detrimental to their clients
Answer: D
NEW QUESTION # 57
Finite insurance is reinsurance which
- A. transfers only a limited amount of risk at less cost than traditional reinsurance
- B. transfers the total risk at less cost than traditional reinsurance
- C. transfers only a limited amount of risk at the usual reinsurance price
- D. transfers the total risk at the usual reinsurance price
Answer: A
NEW QUESTION # 58
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