Preview Questions Risk Manager | Role Specific Skill

Question 1: The European Market Infrastructure Regulation (EMIR) mandates which of the following for OTC derivatives?

Which action should you take?

Choose only one option

Capital adequacy ratios

Risk-weighted asset calculations

Clearing through central counterparties

Stress testing and scenario analysis

Question 2: Which of the following is a limitation of using the Black-Scholes option pricing model for risk analysis?

Which action should you take?

Choose only one option

It is difficult to apply to illiquid assets

It only works with American-style options

It does not account for interest rate fluctuations

It assumes that volatility is constant over time

Question 3: What role do external audit findings play in risk identification?

Which action should you take?

Choose only one option

Ensuring regulatory compliance

Validating internal control effectiveness

Streamlining risk reporting processes

Highlighting potential risks not detected internally

Question 4: What does the term "Credit Value Adjustment (CVA)" refer to in financial risk analysis?

Which action should you take?

Choose only one option

The adjustment to market value for liquidity risk

The adjustment to derivative value for counterparty credit risk

The adjustment for operational risk in portfolio management

The adjustment for market risk in fixed-income securities

Question 5: What is the primary advantage of using Monte Carlo simulations in financial risk analysis?

Which action should you take?

Choose only one option

It simplifies complex risk models for decision-making

It only considers the worst-case outcomes

It provides an exact risk prediction

It generates multiple scenarios to assess risk under different conditions

Question 6: What is the most critical factor to consider when designing a risk mitigation strategy for liquidity risk?

Which action should you take?

Choose only one option

Employing stress testing scenarios

Increasing operational reserves

Managing cash flow mismatches

Reducing debt-to-equity ratios