nayizhenfeng

 

2、Name concentration represents a violation of which condition necessary for the ASRF IRB model?

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

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

C) Systematic risk is defined by a single factor.  

D) Portfolios are composed of granular assets.

nayizhenfeng

 

The correct answer is B

 

Losses predicted by historical default rates are expected and should be covered by loan loss provisions. Unexpected losses are unexpected variations from expected losses. An example would be the losses that arise during an economic downturn when many loans default at the same time.

nayizhenfeng

 

8、Under the Basel II Accord, the standardized approach to credit risk weighting requires all of the following EXCEPT:

A) wherever possible, risk weights must be based on external risk assessments. 

B) past-due loans must receive a credit risk weighting of 150%.  

C) risk exposures with no external weighting must receive a risk weighting of 100%.  

D) sovereign credit risks must receive the same risk weighting as corporate credits domiciled in that sovereign. 

nayizhenfeng

 

The correct answer is D

 

The standardized approach is based primarily on external risk assessments. If no such risk assessments are available, this approach requires a 100% risk weighting. Past due loans must be given a 150% risk weight. However, sovereign (government) credit risks would probably receive lower risk weights than corporate credits due to the added flexibility that governments have as opposed to corporations.

nayizhenfeng

 

15、The advanced IRB approach to calculating risk weights for corporate, sovereign, and bank exposures requires the bank to abide:

A) only by supervisory-set probabilities of default (PD).  

B) by supervisory-set PD and losses given default (LGD).  

C) only by supervisory-set LGD.  

D) by supervisory-set documentation requirements.

nayizhenfeng

 

6、Under the Basel II Capital Accord, the standardized approach to credit risk requires that loans considered past due be risk weighted at:

A) 150%. 

B) 100%.  

C) 200%. 

D) 80%.

nayizhenfeng

 

The correct answer is A

 

Under the Basel II Accord, loans considered past due are risk weighted at 150% to reflect their greater risk profile.

nayizhenfeng

 

7、Under the IRB approach of the Basel II Accord, an unexpected loss:

A) should be part of the probability of default (PD) calculation.  

B) might occur as a result of an economic downturn.  

C) should be covered by loan loss provisions and interest margins.   

D) can be avoided by using historical default rates to estimate losses.

nayizhenfeng

 

The correct answer is B

 

In general, a bank is expected to be more attuned to the risks associated with the retail loans they make, so there is no foundation alternative for retail exposures.

nayizhenfeng

 

5、Under the IRB approach to credit risk, a bank that originates a securitization and retains a first loss position in that securitization must:

A) deduct the position from capital if it is of low credit quality.  

B) apply a higher risk weight to the position. 

C) deduct this position from capital.   

D) rid itself of the position within 90 days.