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12、Operational risk sources for a bank include all of the following EXCEPT:

A) employee misappropriation.
 
B) non-adherence to policy.
 
C) default on loans obtained by submitting false documents.
 
D) absence of standards or policies.

nayizhenfeng

The correct answer is C

Default by customer is part of credit risk irrespective of whether the documents were correct or not.

nayizhenfeng

13、Operational risk is defined as all of the following EXCEPT:

A) risk of rate decrease for a utility.
 
B) financial risk that is not caused by market risk.
 
C) risk of breakdown in normal operations.
 
D) risk of inefficient or insufficient systems. 

nayizhenfeng

The correct answer is A

Operational risk is risk of losses from failed systems, processes, and people. Risk of rate decrease for a utility is part of market risk.

nayizhenfeng

The correct answer is C

Projecting default probabilities would address credit risk, not operational risk.

nayizhenfeng

10、Quantifying operational risk is difficult because:

A) the variance of the market is difficult to compute.
 
B) there are no well-defined procedures or methods.
 
C) the covariance with the market portfolio is difficult to compute.
 
D) the time period needed for measurement is very long.

nayizhenfeng

The correct answer is B

Operational risk management is difficult to quantify because there are no well-defined procedures or methods. Other choices are applicable for measuring beta or systematic risk of equity.

nayizhenfeng

11、Operational risk is defined as all of the following EXCEPT:

A) risk of breakdown in normal operations.
 
B) risk of a swap counterparty not fulfilling their obligation.
 
C) financial risk that is not caused by market risk.
 
D) risk of fraud.

nayizhenfeng

The correct answer is B

Risk of a swap counterparty defaulting is called as credit risk. All of the other choices are examples of operational risk.

nayizhenfeng

8、Sometimes the debate regarding operational risk focuses more on how to properly define it, rather than how to manage it. Operational risk is commonly defined as any risk that is not classified as:

A) risk-adjusted. 
 
B) an indirect loss. 
 
C) market or credit risk. 
 
D) a direct loss.