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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Classic Credit Products, Life Cycle and Credit Risk Methodology | 30% | - Introduction to Credit Risk - Classic Credit Risk Methodology - Classic Credit Products |
| Topic 2: Case Studies | 7% | |
| Topic 3: Counterparty Risk and Risk Mitigation | 13% | - Basics of Counterparty Risk - Risk Mitigation Techniques |
| Topic 4: Credit Risk Modeling and Portfolio Management | 20% | - Modern Credit Risk Modeling - Credit Portfolio Management |
| Topic 5: Credit Derivatives and Securitization | 13% | - Credit Derivatives - Securitization Processes and Instruments |
| Topic 6: Credit Valuation Adjustment (CVA) and Related Topics | 17% | - XVA and SA-CCR - Managing Counterparty Risk and CVA - Credit Valuation Adjustment (CVA) |
Which of the following statements is true:
I. If the sum of its parameters is less than one, GARCH is a mean reverting model of volatility, while EWMA is never mean reverting II. Standardized returns under both EWMA and GARCH show less non-normality than non standardized returns III. Steady state variance under GARCH is affected only by the persistence coefficient IV. Good risk measures are always sub-additive
Correct Answer: D 🗳️
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Which of the following statements are true in relation to Principal Component Analysis (PCA) as applied to a system of term structures?
I. The factor weights on the first principal component will show whether there is common trend in the system II. The factors to be applied to principal components are obtained from eigenvectors of the correlation matrix III. PCA is a standard method for reducing dimensionality in data when considering a large number of correlated variables IV. The smallest absolute eigenvalues and their associated eigenvectors are the most useful for explaining most of the variation
Correct Answer: B 🗳️
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Which of the following is not true about the ISDA master agreement (ISDA MA):
Correct Answer: A 🗳️
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If the default hazard rate for a company is 10%, and the spread on its bonds over the risk free rate is 800 bps, what is the expected recovery rate?
Correct Answer: B 🗳️
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If the marginal probabilities of default for a corporate bond for years 1, 2 and 3 are 2%, 3% and 4% respectively, what is the cumulative probability of default at the end of year 3?
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