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GARP ICBRR Exam
International Certificate in Banking Risk and Regulation (ICBRR) (Page 11 )

Updated On: 12-Feb-2026
Page 11 of 70
PDF with 342 Questions

ThetaBank has extended substantial financing to two mortgage companies, which these mortgage lenders use to finance their own lending. Individually, each of the mortgage companies have an exposure at default (EAD) of $20 million, with a loss given default (LGD) of 100%, and a probability of default of 10%. ThetaBank's risk department predicts the joint probability of default at 5%. If the default risk of these mortgage companies were modeled as independent risks, the actual probability would be underestimated by:

  1. 1%
  2. 2%
  3. 3%
  4. 4%

Answer(s): D



A credit portfolio manager analyzes a large retail credit portfolio.
Which of the following factors will represent typical disadvantages of market-linked credit risk drivers?

I) Need to supply a large number of input parameters to the model
II) Slow computation speed due to higher simulation complexity
III) Non-linear nature of the model applicable to a specific type of credit portfolios
IV) Need to estimate a large number of unknown variable and use approximations

  1. I
  2. I, II
  3. II, III
  4. III, IV

Answer(s): B



Which one of the following four metrics represents the difference between the expected loss and unexpected loss on a credit portfolio?

  1. Credit VaR
  2. Probability of default
  3. Loss given default
  4. Modified duration

Answer(s): A



Gamma Bank is active in loan underwriting and securitization business, and given its collective credit exposure, it will be typically most interested in the following types of portfolio credit risk:

I) Expected loss
II) Duration
III) Unexpected loss
IV) Factor sensitivities

  1. I
  2. II
  3. I, III
  4. I, III, IV

Answer(s): D



To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:

  1. Credit VaR
  2. Expected loss
  3. Unexpected loss
  4. Factor sensitivity

Answer(s): B






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