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NEW QUESTION: 1
Stress testing should ideally be carried out under a:
A. test environment with production workloads.
B. test environment with test data.
C. production environment with production workloads.
D. production environment with test data.
Answer: D

NEW QUESTION: 2
The popularity of FX-trading via Internet platforms has serious implications for the applicability of traditional rules such as "Know Your Customer". Which of the following are correct?
A. "Know Your Customer" rules cannot be applied online and banks will have to rely instead on new safeguards such as third-party authentication.
B. In practice, banks can avoid "Know Your Customer" rules by limiting online deal size to EUR
100,000.00 or equivalent.
C. No trading should be carried out without first identifying and setting up the counterparty; this includes
"Know Your Customer" procedures.
D. "Know Your Customer" rules apply only to retail customers and are therefore irrelevant to currency trading.
Answer: C

NEW QUESTION: 3
A portfolio's 1-day VaR at the 99% confidence level is $250m. What is the annual volatility of the portfolio?
(assuming 250 days in the year)
A. $2,410.3m
B. $107.5m
C. $1,699.4m
D. $3,952.8m
Answer: C
Explanation:
Explanation
This is easy to calculate as follows: At the 99% confidence level, the VaR=2.326 * Std Deviation (remember the z values at the 95% and 99% levels, the PRMIA exam may not give you these values). Thus the 1-day standard deviation is $250m/2.326, and the 250-day standard deviation is 250 * ($250m/2.326) = $1,699.4m.
Remember: if you know the VaR, you know the standard deviation. Once you know the standard deviation for any period of time, you can convert it into standard deviation for another period using the square root of time rule. You can also calculate the VaR at a different confidence level too.