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PRMIA 8004 Exam Syllabus Topics:
| Section | Objectives |
|---|---|
| Case Studies | - Washington Mutual (Wamu) - Silicon Valley Bank - WorldCom - FTX - Bankers Trust - Metallgesellschaft - Lehman Brothers - National Australia Bank (NAB) - FX Options - Fannie Mae and Freddie Mac - Operational Resilience at TSB - Long Term Capital Management (LTCM) - Barings - American Insurance Group (AIG) - Northern Rock - Orange County |
| Standards & Practices | - Bylaws of Professional Risk Managers' International Association, PRMIA - Principles of Good Governance Principles, PRMIA - Standards of Best Practice, Conduct and Ethics, PRMIA Ethics Committee - Group of Thirty Best Practices, Global Derivatives Study Group |
PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Sample Questions:
1. What was the main risk scenario on the Metallgesellschaft trading strategy?
A) The final price of the underlying being higher than the initial price
B) Realized losses on short-term contracts against unrealized gains on the long-run contract
C) The short-term price of the underlying being higher than the long-run contract
D) The initial price of the underlying being higher than the final price
2. A risk manager has just completed a risk assessment project. The report has been given to the risk manager's direct supervisor, who refuses to escalate the material issues raised in the report. Further, the direct supervisor edits the report to remove the section describing the material risk, who then submits it to the firm's Executive Committee.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), which of the following actions is most appropriate:
A) If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO
B) Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization
C) The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done
D) The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee
3. The problems which initiated the crisis at Northern Rock during the summer of 2007 were:
A) A general lack of confidence in mortgage backed securities associated in large part with developments in the US sub-prime mortgage market, and doubts emerging about the viability of the Northern Rock business model
B) Large customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent
C) Doubts arising about the viability of the business model which necessitated Bank of England intervention
D) A depositor run on the bank, following doubts about the viability of the Northern Rock business model
4. The financial intermediary services provided by Fannie Mae and Freddie Mac were designed to
A) Buy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow
B) Repackage mortgage loans made by banks and sell them on to investors as asset backed securities
C) Compete directly with banks in selling mortgaged to would-be home owners
D) Offer loans directly to the consumer
5. Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I competitive market conditions
II ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders III ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators IV reporting all such personnel to the local regulator
A) I and II only
B) All of the above
C) I, II and IV only
D) II, III and IV only
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: D | Question # 3 Answer: A | Question # 4 Answer: B | Question # 5 Answer: A |






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