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8010 – Operational Risk Manager (ORM) Exam

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Showing 10–12 of 15 questions

Question 10

The probability of default of a security during the first year after issuance is 3%, that during the second and third years is 4%, and during the fourth year is 5%. What is the probability that it would not have defaulted at the end of four years from now?

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  • ○

    12.00%
  • ○

    88.53%
  • ○

    88.00%
  • ○

    84.93%
Question 11

When modeling operational risk using separate distributions for loss frequency and loss severity, which of the following is true?

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  • ○

    Loss severity and loss frequency are considered independent
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    Loss severity and loss frequency distributions are considered as a bivariate model with positive correlation
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    Loss severity and loss frequency are modeled using the same units of measurement
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    Loss severity and loss frequency are modeled as conditional probabilities
Question 12

If two bonds with identical credit ratings, coupon and maturity but from different issuers trade at different spreads to treasury rates, which of the following is a possible explanation:

I. The bonds differ in liquidity

II. Events have happened that have changed investor perceptions but these are not yet reflected in the ratings

III. The bonds carry different market risk

IV. The bonds differ in their convexity

Select an option, then click Submit answer.

  • ○

    I, II and IV
  • ○

    II and IV
  • ○

    I and II
  • ○

    III and IV
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    The bonds differ in liquidity
    II. Events have happened that have changed investor perceptions but these are not yet reflected in the ratings
    III. The bonds carry different market risk
    IV. The bonds differ in their convexity