nayizhenfeng

 

2、Which of the following are problems with Gordy and Lütkebohmert?

      I. The granularity adjustment may not work well on small portfolios.

     II. The model ignores idiosyncratic recovery risk.

    III. The adjustment is inconsistent with the IRB model.

    IV. The model performs poorly.

A) I and II.

B) II and III.

C) I and III.

D) II and IV.

nayizhenfeng

 

The correct answer is C

 

The Gordy and Lütkebohmert granularity adjustment may not work well on small portfolios. Fortunately, the adjustment errors on the conservative side and may still be useful. Second, the underlying model is inconsistent with the IRB model and therefore, cannot be tested.

nayizhenfeng

 

3、Gordy and Lütkebohmert find that extending the cut-off point of exposures:

      I. creates a small change in the granularity adjustment.

     II. decreases the estimates of systematic risk.

    III. increases the bank’s exposure to credit losses.

    IV. reduces required capital.

A) I only.  

B) I and III.

C) II and III.  

D) I and IV.

nayizhenfeng

 

The correct answer is D

 

Gordy and Lütkebohmert suggest that extending the ‘cut-off’ point of exposures creates a small change in the granularity adjustment and reduces required capital.

nayizhenfeng

 

AIM 9: Explain the gap between real economic capital and ASRF performance.

1、Which of the following explain the gap between real economic capital and the estimation generated by ASRF IRB model?

      I. Inaccurate data.

     II. Business cycles.

    III. Correlation estimates.

    IV. Model structure.

A) I and III.  

B) II only. 

C) III and IV.  

D) IV only.

nayizhenfeng

 

The correct answer is C

 

The primary shortcomings of the ASRF IRB model are only one systematic risk factor and omission of inter- and intra-sector correlation.

nayizhenfeng

 

2、Which sector concentration risk measurement model introduced an infection parameter allowing credit risk correlation across exposures?

A) BET.  

B) Duellmann. 

C) Garcia Cespedes et al.  

D) Pykhtin.

nayizhenfeng

 

The correct answer is B

 

Duellmann extends BET by allowing credit risk to be correlated across exposures measured by a third parameter, the ‘infection’ probability between exposures. This violates the IRB model condition of portfolio invariance.

nayizhenfeng

 

AIM 10: Compare and contrast Pykhtin, binomial expansion technique, Duellmann, Duellmann and Masschelein, and Garcia Cespedes et al. models to estimate capital.

1、Which sector concentration risk measurement model requires a complete structure of intra and inter sector correlation?

A) Duellman.  

B) Garcia Cespedes et al.

C) Pykhtin.  

D) Duellmann and Masschlein.

nayizhenfeng

 

The correct answer is C

 

Pykhtin requires a complete structure of intra and inter-sector correlations.