Which one of the four following statements about technology systems for managing operational risk event
data is incorrect?

• A.The implementation of a new operational risk event loss database has to incorporate an analysis of the
  advantages and disadvantages of external systems.
• B.Operational risk event databases are always integrated with the other components of the operational risk
  management program.
• C.Operational risk loss event data collection software can be internally developed.
• D.Operational risk event databases are independent elements of the operational risk management
  framework.

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When the cost of gold is $1,100 per bullion and the 3-month forward contract trades at $900, a commodity
trader seeks out arbitrage opportunities in this relationship. To capitalize on any arbitrage opportunities, the
trader could implement which one of the following four strategies?

• A.Short-sell physical gold and take a long position in the futures contract
• B.Take long positions in both physical gold and futures contract
• C.Short-sell both physical gold and futures contract
• D.Take a long position in physical gold and short-sell the futures contract

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To safeguard its capital and obtain insurance if the borrowers cannot repay their loans, Gamma Bank accepts
financial collateral to manage its credit risk and mitigate the effect of the borrowers' defaults. Gamma Bank
will typically accept all of the following instruments as financial collateral EXCEPT?

• A.Mutual fund shares and similar unit investment vehicles subject to daily quotes
• B.Commercial debts owed to a company in a form of receivables
• C.Equities and convertible bonds included in a main market index
• D.Unrated bonds issued and traded on a recognized exchange

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Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk
is correct?

• A.Both parametric and nonparametric methods make no assumptions about return distributions.
• B.Parametric methods make no assumptions about return distributions, and non-parametric methods
  assume returns are normally distributed.
• C.Parametric methods generally assume returns are normally distributed, and non-parametric methods
  make no assumptions about return distributions.
• D.Both parametric and nonparametric methods assume returns are normally distributed.

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Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year
no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate
spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both
interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta
defaults, the bank expects to lose 50% of its promised payment. What interest rate should Alpha Bank charge
on the no-payment loan to Delta Industrial Machinery Corporation?

• A.8%
• B.10%
• C.9%
• D.12%

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