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The correct answer is C

There is no agreed upon central definition of operational risk. However, a standard or common definition would be any risk not characterized as market or credit risk. There are many definitions, thus the importance of BIS (Bank of International Settlement) having a standardized definition of operational risk.

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9、All of the following are components of an effective operational risk management system EXCEPT:

A) calculating and executing accurate settlement payments.
 
B) processing transactions.
 
C) projecting default probabilities for counterparties based upon historical experience. 
 
D) collecting data effectively.

nayizhenfeng

 

The correct answer is D

 

factor model explains the variation in the dependent variable (e.g., stock returns, revenue, or expenses) with macroeconomic factors through regression analysis. The R² measures the proportion of variation explained by the factors. Operational risk is the idiosyncratic variation left unexplained by the factors, or , called residual variance. Coefficient estimates measure the sensitivity of the operating variable to changes in the associated macroeconomic factor. Operating leverage is the change in variable costs for a given change in total assets. A measure of operational risk is unexpected changes in operating leverage.

nayizhenfeng

 

The correct answer is A

 

The first step in measuring operational risk is to categorize potential losses into groups in terms of size and frequency.

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6、The risks that will tend to have high expected losses but relatively low unexpected losses are:

A) high-frequency, high-severity risks. 

B) low-frequency, high-severity risks. 

C) high-frequency, low-severity risks. 

D) low-frequency, low-severity risks.

nayizhenfeng

 

The correct answer is C

 

Data availability and frequent occurrence make the losses associated with high-frequency, low-severity risks the most predictable of operational risks.

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 7、The measure of operational risk in top-down factor models is:

A) R2.

B) operating leverage.

C) estimated factor coefficient.

D) residual variance.

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4、The operational risks that will tend to have low expected losses but relatively high unexpected losses are:

A) low-frequency, low-severity risks.

B) low-frequency, high-severity risks.

C) high-frequency, low-severity risks.

D) high-frequency, high-severity risks.

nayizhenfeng

 

The correct answer is B

 

Lack of adequate internal data makes the losses associated with low-frequency, high-severity risks the least predictable of operational risks.

nayizhenfeng

 

5、The process of measuring operational risk may categorize potential losses into groups in terms of:

A) size and frequency.

B) size and style.

C) frequency and style.

D) probability and frequency.