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The early 2003 trading strategy of China Aviation oil was

A.

to buy calls and sell puts

B.

to buy puts and sell calls

C.

to sell puts and buy calls

D.

to sell calls and buy puts

According to the G-30 Study, the risk management infrastructure's funding must be

A.

determined by business-unit leaders

B.

determined at the Board level with inputs from business unit leaders

C.

determined at the Board level without influence by business unit leaders

D.

determined by the regulators

Unlike the case at Barings Bank, National Australia Bank:

A.

Had a risk management infrastructure that was credited with doing its' job well, despite the losses

B.

Was not dealing in derivatives

C.

Had a Board of Directors that was unaware of the true nature of trading activities

D.

Had a separation of duties between trading and back office

With a PRMIA member's need to reconcile their internal and external responsibility to perform their work in an independent and appropriate fiduciary manner, which of the following options must be taken into consideration when performing risk management duties?

A.

Internal controls of the organization, and the local regulator

B.

Internal controls, and the expectations of stakeholders, shareholders, and the general public

C.

The local regulator, internal controls, and shareholders

D.

Only the internal controls and compliance standards

According to LTCM managers:

A.

Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties

B.

Stress Testing was not conducted

C.

Stress Testing was not necessary because their trades were hedged

D.

Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations

Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:

I. competitive market conditions

II. ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders

III. ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators

IV. reporting all such personnel to the local regulator

A.

II, III and IV only

B.

I, II and IV only

C.

All of the above

D.

I and II only

Which of the following was NOT a factor in the WorldCom collapse?

A.

Failed corporate governance

B.

Accounting abuses

C.

Unfair pricing to customers

D.

Over stating actual sales

Which of the following is FALSE?

A.

Nick Leeson also ran the back office for his trading area

B.

Nick Leeson dealt in complex derivatives lacking transparency of pricing

C.

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

D.

Nick Leeson claimed to be running an arbitrage book

Select the one correct statement relative to Barings Bank.

A.

Proprietary and agency trading were combined and therefore did not increase risk.

B.

Proprietary and agency trading were separate and therefore did not increase risk.

C.

Proprietary and agency trading were combined and therefore did increase risk.

D.

Proprietary and agency trading were separate and did increase risk.

The hedging strategy employed by MG Refining & Marketing has been called:

A.

Dynamic hedging

B.

A stacked hedge

C.

A differential hedge

D.

Nothing because MG Refining & Marketing did not hedge its position