PASS PRO Questions
Which of the following are examples of model risk?
I. A VaR model that has been prepared by an external contractor.
II. A mark-to-market model that cannot be understood by risk managers.
III. A VaR model that does not allow for the adjustment of market correlations.
IV. A mark-to-market model that relies on volatility figures prepared by the trader being
A. I and III.
B. II and IV.
C. II, III and IV.
D. I, II, III and IV.
Which of the following would be regarded as best practice in risk management policy?
A. The disaster recovery plan needs to be updated as the processes undergo change.
Studies of audit reports for assessing operations risk need to be modified to reflect changes
in operations procedure after the production of report.
In the initial phase of implementing operations risk, it is essential to involve business heads
to assess the extent of loss once the loss event occurs.
D. All of the above.
Which of the following best describes the process of measurement of operations risk?
I. Directly estimate the expected loss due to operations risk.
II. Find out the probability of operational failure and then measure the amount of expected loss
given the failure.
III. Find out the probability of operational failure, adjusted for any risk mitigation techniques
deployed, and then measure the amount of expected loss given the failure.
A. I only.
B. II only.
C. III only.
D. I and III.