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Practice PRMIA 8009 Exam Questions

1. Page: 1/22
  Total 110 Questions
Question No 1

A VaR model for managing market risk at Barings Bank in London would most likely have:

Choose the Choices:

Alerted senior management to the problems before the major losses occurred

Helped very little as Nick Leeson hid many trades

Not correctly assessed the risk in Nick Leeson's option trades as they have non - linear price characteristics

Been used if senior management had ever seen it

B
Question No 2

Which of the following is FALSE?

Choose the Choices:

Nick Leeson also ran the back office for his trading area

Nick Leeson dealt in complex derivatives lacking transparency of pricing

SIMEX made inquiries to Barings Bank about large margin calls on its positions

Nick Leeson claimed to be running an arbitrage book

B
Question No 3

What is (are) the lesson(s) of the Barings' failure?

Choose the Choices:

Incentive plans have risk management implications

Front and back offices need to be independent

Large profits can be an indicator of risk

All of the above

D
Question No 4

Which of the following was a key problem in the Barings Bank case?

Choose the Choices:

Having the back office and front office operations under the same person

Difference in the contract sizes in the OSE and SIMEX

The different time zones that the office was trading in

Leeson was executing an arbitrage strategy even though he was not authorized to do so

A
Question No 5

Barings failed to recognize that Nick Leeson's losses were increasing because:

Choose the Choices:

Leeson ran the front office

The London office did not ask for any reports

Leeson hid his trades in a suspense account

The margin report sent to London did not show the true margin needs

C
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