nayizhenfeng

 

4、The IRB asset correlations for the credit risk weight function are:

      I. 12% to 24% for corporates, sovereigns, and banks.

     II. 3% to 16% for retail exposures.

    III. 15% for mortgages.

    IV. 8% for revolving retail exposures.

A) One of the above is false.  

B) I and III are false. 

C) II and IV are false. 

D) All of the above are true. 

nayizhenfeng

 

The correct answer is A

 

The asset correlation for revolving retail exposures is 4%.

nayizhenfeng

 

5、High asset correlation in the IRB credit risk weight function is associated with:

      I. large corporate loans.

     II. larger firm size.

    III. retail loans.

    IV. higher PD assets.

A) I and II.  

B) II and III.  

C) I, II, and IV.  

D) I only.

nayizhenfeng

 

The correct answer is D

 

Larger firm size only applies to corporates, not banks and sovereigns. This statement is only partly true, therefore false. Retail loans and higher PD assets, generally have lower correlations.

nayizhenfeng

 

6、Which of the following suggest higher capital based on the IRB credit risk weight function:

      I. Higher systematic risk factor.

     II. Higher EL.

    III. Higher LGD.

    IV. Higher M.

A) II and IV.  

B) II, III, and IV.

C) I, III, and IV.

D) I, II, III, and IV.

nayizhenfeng

 

The correct answer is C

 

EL is covered by revenues or reserves. It does not raise required capital.

nayizhenfeng

 

AIM 7: Define name and sector concentration and the related violation of the conditions for the IRB risk weight function.

 

1、Sector concentration represents a violation of which condition necessary for the ASRF IRB model?

A) Assumption that all borrowers in the same region and industry have a correlation of 0.5.

B) Systematic risk is defined by a single factor.  

C) Risk weights for each obligor depend upon the systematic risk specific to the portfolio. 

D) Portfolios are composed of granular assets.

nayizhenfeng

 

The correct answer is B

 

Sector concentration risk represents an exposure to an industry or geography creating additional systematic risk factors.

nayizhenfeng

 

AIM 8: Explain the granularity adjustment in Gordy and Lütkebohmert, discussing recent innovation and continued concerns.

1、Which model measuring name concentration estimates an upper bound to the granularity adjustment?

A) Gordy and Lütkebohmert.

B) Vasicek.  

C) Emmer and Tasche. 

D) BET.

nayizhenfeng

 

The correct answer is A

 

Gordy and Lütkebohmert estimates an upper bound to the granularity adjustment.