Last Updated: Jun 13, 2026
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1. Which of the following is not a limitation of the univariate Gaussian model to capture the codependence structure between risk factros used for VaR calculations?
A) It cannot capture linear relationships between risk factors.
B) A single covariance matrix is insufficient to describe the fine codependence structure among risk factors as non-linear dependencies or tail correlations are not captured.
C) Determining the covariance matrix becomes an extremely difficult task as the number of risk factors increases.
D) The univariate Gaussian model fails to fit to the empirical distributions of risk factors, notably their fat tails and skewness.
2. Altman's Z-score does not consider which of the following ratios:
A) Net income to total assets
B) Sales to total assets
C) Market capitalization to debt
D) Working capital to totalassets
3. Changes in which of the following do not affect the expected default frequencies (EDF) under the KMV Moody's approach to credit risk?
A) Changes in the firm's market capitalization
B) Changes in the risk free rate
C) Changes in asset volatility
D) Changes in the debt level
4. What would be the correct order of steps to addressing data quality problems in an organization?
A) Articulate goals, do a 'strategy-fit' analysis and plan for action
B) Assess the current state, design the future state, determine gaps and the actions required to be implemented to eliminate the gaps
C) Call in external consultants
D) Design the future state, perform a gap analysis, analyze the current state and implement the future state
5. Which of the following steps are required for computing the total loss distribution for a bank for operational risk once individual UoM level loss distributions have been computed from the underlhying frequency and severity curves:
I. Simulate number of losses based onthe frequency distribution
II. Simulate the dollar value of the losses from the severity distribution III. Simulate random number from the copula used to model dependence between the UoMs IV. Compute dependent losses from aggregate distribution curves
A) None of the above
B) All of the above
C) I and II
D) III and IV
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: A | Question # 3 Answer: B | Question # 4 Answer: B | Question # 5 Answer: C |
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