Free ICBRR Exam Braindumps (page: 12)

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Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly approximates the yield on a risk-free instrument:

  1. Bond + CDS
  2. Bond + CDS + Market Spread
  3. Bond - CDS
  4. Bond - CDS - Market spread

Answer(s): A



Which of the following factors can cause obligors to default at the same time?

I) Obligors may be harmed by exposures to similar risk factors simultaneously.
II) Obligors may exhibit herd behavior.
III) Obligors may be subject to the sampling bias.
IV) Obligors may exhibit speculative bias.

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

Answer(s): C



After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ return on equity for the bank, because the cash generated by the risk-transfer and the overall ___ of the bank's exposure to the risk.

  1. Increases; increase;
  2. Increases; reduction;
  3. Decreases; increase;
  4. Decreases; reduction;

Answer(s): B



When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are increasing as the stigma of default evaporates, and more borrowers default. This phenomenon constitutes

  1. Moral hazard
  2. Speculative bias
  3. Herd behavior
  4. Adverse selection

Answer(s): C






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