PRMIA MLARM Certification Exam Sample Questions

MLARM Dumps PDF, Market, Liquidity and Asset Liability Risk Management Dumps, download Market, Liquidity and Asset Liability Risk Management free Dumps, PRMIA Market, Liquidity and Asset Liability Risk Management exam questions, free online Market, Liquidity and Asset Liability Risk Management exam questionsYou have to pass the MLARM 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 Market, Liquidity and Asset Liability Risk Management sample questions. Our Sample PRMIA Market, Liquidity and Asset Liability Risk Management Practice Exam will give you more insight about both the type and the difficulty level of the questions on the PRMIA Market, Liquidity and Asset Liability Risk Management exam.

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PRMIA Market, Liquidity and Asset Liability Risk Management Sample Questions:

01. A bank aggregates desk-level value at risk figures into a firm-wide number using historically estimated correlations, producing a total well below the sum of the parts.
What is the principal risk in relying on that figure?
a) Aggregating by desk double counts positions hedged across desks, overstating exposure.
b) The diversification benefit is largest in calm markets and shrinks precisely when the firm needs it.
c) The aggregated figure cannot be reconciled to the sum of the desk limits, which makes firm-wide limit monitoring impossible to operate in practice.
d) Historical correlations are estimated with error, and the aggregate therefore carries a confidence interval the single number does not convey.
 
02. A bank can sell its government bond portfolio within minutes at close to the screen price, yet it cannot roll the commercial paper that finances those bonds.
Which risk is it facing?
a) Solvency risk, since being unable to refinance means the bank's liabilities now exceed its assets.
b) Market liquidity risk, because the bank cannot realize the value of its portfolio when it needs to.
c) Funding liquidity risk, because the assets are liquid while the money that finances them is not.
d) Interest rate risk, since replacing the paper will reprice the funding side.
 
03. A firm had written large volumes of credit protection with contractual provisions requiring collateral to be posted if its own credit rating fell.
Why is that structure so dangerous?
a) The obligation to post arrives exactly when the firm is least able to raise cash.
b) Rating agencies downgraded the firm without notice, giving it no opportunity to arrange alternative funding before the collateral fell due.
c) Credit protection on structured products cannot be hedged.
d) Daily marking produced losses that eroded capital.
 
04. A fund held relative-value positions across many markets whose historical correlations were low, and applied substantial leverage on the strength of that diversification.
Why did the diversification fail?
a) An arithmetic error in the fund's correlation matrix.
b) Regulators changed the capital treatment.
c) Positions sat in one asset class.
d) A flight to quality moved every spread the same way at once.
 
05. A risk committee proposes to build its liquidity stress scenario directly on the observed outflow pattern of a recent bank failure.
What is the principal limitation of doing so?
a) The scenario would inherit that bank's funding structure rather than reflect this one's.

b) Historical episodes are unrepeatable, so calibrating any scenario on a past event produces a figure with no forward-looking value.

c) Supervisors prohibit basing an internal scenario on one institution's experience.
d) Recent failures are too recent to have been fully analyzed, so the reported outflow figures may be revised substantially in future.
 
06. Several of the institutions studied on this syllabus were solvent on the day their difficulties became acute.
What common conclusion does that support?
a) Liquidity failure can end an institution before any solvency assessment concludes.
b) Solvency measures are unreliable, since institutions reported adequate capital immediately before failing in every one of these cases.
c) Deposit funding should be replaced by long-term debt across the banking system, since deposits are the least reliable source of funds available.
d) Central banks should provide unlimited liquidity support to any institution experiencing an outflow, since solvent firms should not fail for want of cash.
 
07. Sponsoring banks supported off-balance-sheet vehicles they had no contractual obligation to support.
What does that behavior establish for a supervisor?
a) That the vehicles were poorly structured, since a properly constructed vehicle would have been able to fund itself through the crisis.
b) Investors were misled about the sponsor's obligations.
c) That the capital treatment applied to the vehicles was correct, since the sponsor demonstrated it could absorb the losses when required.
d) That the risk never genuinely left the sponsor, whatever the documentation said.
 
08. Transactions were structured so that assets left the balance sheet shortly before reporting dates and returned soon afterwards, understating reported leverage.
What is the durable lesson for a user of published financial statements?
a) Repurchase agreements belong off balance sheet, and the treatment applies wherever the repurchase price is fixed at the outset.
b) Leverage ratios are unreliable measures of risk and should be replaced by risk-weighted measures that reflect the quality of the assets held.
c) A reported balance sheet is a snapshot taken on chosen dates, and reported leverage can be managed around them.
d) External auditors should verify the balance sheet position on randomly selected dates within or after the reporting period.
 
09. Two very large institutions held concentrated portfolios of mortgage assets financed with debt, and managed the resulting interest rate exposure actively.
Why does prepayment optionality make that exposure especially difficult to hedge?
a) The assets shorten when rates fall and lengthen when they rise, so the hedge must be rebalanced against the market.
b) Prepayment penalties make early repayment uneconomic when rates fall, so the optionality rarely materializes.
c) Prepayment behavior is entirely random, so no statistical relationship exists between interest rates and the speed at which mortgages repay.
d) Mortgage assets cannot be hedged with interest rate derivatives, since no instrument replicates the cash flows of a prepayable loan.
 
10. What does the failure of Washington Mutual illustrate about the relationship between asset deterioration and deposit stability?
a) Insurance coverage alone determines deposit stability.
b) Asset deterioration is slow enough to leave time to act.
c) They fail together rather than independently, because depositors read the asset news.
d) Wholesale funding can always replace lost deposits.

Answers:

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

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