PRMIA CCRM Certification Exam Sample Questions

CCRM Dumps PDF, Credit and Counterparty Risk Management Dumps, download Credit and Counterparty Risk Management free Dumps, PRMIA Credit and Counterparty Risk Management exam questions, free online Credit and Counterparty Risk Management exam questionsYou have to pass the CCRM exam to receive the certification from PRMIA. To increase the effectiveness of your study and make you familiar with the actual exam pattern, we have prepared this PRMIA Credit and Counterparty Risk Management sample questions. Our Sample PRMIA Credit and Counterparty Risk Management Practice Exam will give you more insight about both the type and the difficulty level of the questions on the PRMIA Credit and Counterparty Risk Management exam.

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PRMIA Credit and Counterparty Risk Management Sample Questions:

01. Following an early termination under a master agreement, the determining party calculates a close-out amount.
What does that amount represent?
a) The unpaid amounts that had fallen due before termination but had not been settled by the defaulting party.
b) The cost of replacing the economic equivalent of the terminated transactions, determined in good faith using commercially reasonable procedures.
c) The total notional value of all transactions outstanding under the master agreement at the moment of early termination.
d) The sum of the collateral posted by the defaulting party, which is applied against the non-defaulting party's claim.
 
02. A master agreement distinguishes between events of default and termination events.
What is the essential difference between the two categories?
a) An event of default gives rise to a payment obligation, whereas a termination event simply suspends performance until the circumstance is resolved.
b) An event of default terminates all transactions automatically, whereas a termination event requires notice to be given by either party.
c) An event of default arises under the master agreement itself, while a termination event arises under a separate credit support annex.
d) An event of default involves fault by one party, while a termination event arises from circumstances neither party controls.
 
03. Why did the XVA family of adjustments expand beyond CVA after the financial crisis?
a) Accounting standards were amended to require every valuation adjustment to be disclosed separately in the financial statements.
b) Funding, margin and capital ceased to be free, so each became a cost that had to be priced into a derivative rather than absorbed centrally.
c) Counterparty defaults became more frequent, so banks needed a wider range of adjustments to reflect the increased credit risk.
d) Regulators mandated a standard set of valuation adjustments that banks implemented as XVA.
 
04. A bank discounts the cash flows of a fully collateralized derivative at the rate paid on the collateral rather than at an unsecured funding rate.
What justifies that choice?
a) The collateral rate is lower than the bank's unsecured funding rate, which produces a more conservative valuation of the position.
b) Accounting standards require a single discount curve to be applied consistently across all derivative positions in a portfolio.
c) The collateral balance tracks the derivative's value and earns the contractual rate, so that rate is the true cost of carrying the position.
d) Collateralized trades carry no counterparty risk, so the risk-free rate is the appropriate discount rate for their cash flows, and for the collateral balance itself.
 
05. A clearing member posts as collateral to a central counterparty securities issued by banks that are themselves clearing members of the same clearing house.
What risk does this create?
a) Wrong-way risk at system level, since the collateral loses value in exactly the conditions in which the clearing house would need to realize it.
b) No material risk, provided the clearing house applies an appropriate haircut reflecting the volatility of the securities posted.
c) Liquidity risk, because bank securities may be difficult to sell quickly during a period of market stress.
d) Concentration risk only, which the clearing house manages by applying limits to how much of any single issuer it will accept.
 
06. The SA-CCR exposure at default is computed by scaling the sum of replacement cost and potential future exposure by a supervisory factor known as alpha.
What is that factor intended to capture?
a) The cost of funding the collateral posted against the netting set, and of carrying it over the life of the trades.
b) The additional exposure arising between the last margin call and close-out, which replacement cost measures only at the current date.
c) Effects the formula does not model directly, including correlation between exposure and default and the concentration in a bank's counterparty portfolio.
d) The probability that the counterparty defaults during the life of the netting set, which the exposure calculation omits.
 
07. Under SA-CCR, trades within a netting set are allocated to asset classes and then to hedging sets before add-ons are calculated.
What does the hedging set structure control?
a) Which trades are permitted to offset one another, so that a long and a short in the same risk factor reduce the add-on rather than adding to it.
b) The order in which collateral is applied across trades, determining which positions are treated as secured.
c) The maturity factor applied to each trade, which scales the add-on according to how long the position remains outstanding.
d) Which counterparties may be combined into a single netting set, and how their exposures are then aggregated.
 
08. A central counterparty sizes initial margin using a model calibrated to cover potential losses over an assumed close-out period at a high confidence level.
Why does it also include stressed historical observations in the calibration?
a) Stressed data increases the margin requirement, which raises the central counterparty's revenue from investing posted collateral.
b) Regulators require every margin model to reproduce the losses observed in the most severe historical crisis on record.
c) Historical simulation is the only permitted methodology, so the model must use whatever data the lookback window contains.
d) Recent calm data would produce margin that falls just as risk builds, so stressed periods keep requirements from being procyclical.
 
09. SA-CCR allocates each derivative trade to an asset class before computing add-ons.
Which of the following is such an asset class under the framework?
a) Collateralized derivatives, which are assessed separately because posted margin reduces the potential future exposure component.
b) Interest rate derivatives, which are grouped into hedging sets by currency and then by maturity bucket.
c) Cleared derivatives, which are separated from bilateral trades before any add-on is computed.
d) Long-dated derivatives, which attract a higher add-on than trades maturing within one year of the reporting date.
 
10. A clearing member must contribute to its central counterparty's default fund, and holds capital against that contribution.
Why does the contribution attract a capital requirement at all?
a) Regulators wish to discourage central clearing concentration, so the charge makes clearing membership deliberately expensive.
b) The contribution is an equity investment in the central counterparty, and equity holdings in financial institutions attract capital.
c) The contribution is illiquid and cannot be recovered on demand, so it is treated as an intangible asset for capital purposes.
d) It is a mutualized loss-absorbing commitment that can be consumed by another member's failure, so it is genuinely at risk.

Answers:

Question: 01
Answer: b		 Question: 02
Answer: d		 Question: 03
Answer: b		 Question: 04
Answer: c		 Question: 05
Answer: a
Question: 06
Answer: c		 Question: 07
Answer: a		 Question: 08
Answer: d		 Question: 09
Answer: b		 Question: 10
Answer: d

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