Chapter 17b: Analyze the 1-year transition matrix below: Starting Rating Ends as AA Ends as BB Ends as Default (D) AA 0.85 0.10 0.05 BB 0.15 0.65 0.20 Default (D) 0.00 0.00 1.00 Review the following statements regarding the expected credit migration over a 12-month horizon: (i) The probability that a bond initially rated BB will default within the first year is 20.0%. (ii) The probability that a bond initially rated AA will experience any negative credit event (either a downgrade to BB or a default) during the first year is 10.0%. (iii) The probability that a bond initially rated AA maintains its current rating at the end of the year is 85.0%. Which of the statements above is/are accurate?

Chapter 12 (Continued from previous question): You are using the bootstrapping historical simulation to evaluate the portfolio risk with the portfolio parameters as follows: Portfolio Value: $5,000,000 Confidence Level: 80% Time Horizon: 15 Days Simulated Data (Sorted Returns for 3 Draws): Below are the sorted daily returns for three independent bootstrap draws, randomly sampled (with replacement) from an original historical dataset. Each draw contains 15 samples. Draw 1: -9%, -6%, -3%, -1%, 0%, 0%, 1%, 2%, 2%, 3%, 3%, 4%, 5%, 5%, 7% Draw 2: -7%, -5%, -3%, -2%, -1%, 0%, 1%, 1%, 2%, 3%, 4%, 4%, 5%, 6%, 8% Draw 3: -8%, -7%, -6%, -4%, -2%, -1%, 0%, 1%, 2%, 2%, 3%, 5%, 6%, 7%, 9% Based on the data above, what are the Expected Shortfall (ES) Percentage and ES (Dollars) for Draw 3?

Chapter 11c: Consider a 20-day dataset of daily portfolio returns. If a risk manager attempts to calculate the 95% confidence level VaR and Expected Shortfall on this specific 20-day sample: (i) The tail size consists of exactly 1 day. (ii) The 95% VaR is smaller than the 95% Expected Shortfall percentage values. (iii) Calculating meaningful, distinct values for ES requires a robust sample size with thousands of data points. Which of the above statements is/are correct?

Chapter 20b: Which of the following statements regarding the Risk and Control Self-Assessment (RCSA) framework is correct?

Chapter 17a: In the context of estimating Probability of Default (PD), how does the Structural Model (Merton Model) operate?

Chapter 14 (Continued from previous question): Assume a hypothetical bond trading at a premium. Face Value: $1,000 Annual Coupon Rate: 8% Yield to Maturity (YTM): 5% Years to Maturity: 4 years Current Price: $1,106.38 Determine the exact convexity of this premium bond. Which of the following values is correct?

Chapter 28: A bank is evaluating a new commercial real estate loan portfolio. Based on the data provided below, what is the Risk-Adjusted Return on Capital (RAROC)? Loan Amount (Exposure at Default – EAD): $20,000,000 Interest Spread & Fees (Expected Revenues): 6% of EAD Operating & Funding Costs (Expenses): $300,000 Probability of Default (PD): 3% Loss Given Default (LGD): 40% Economic Capital (EC): $3,000,000 Hurdle Rate (Target Equity Return): 18%

Chapter 20b: Which of the following statements correctly describe the differences among Key Risk Indicators (KRIs), Key Performance Indicators (KPIs), and Key Control Indicators (KCIs)? (i) KPIs are forward-looking metrics focusing on how well strategy was executed. (ii) KRIs are forward-looking metrics focusing on where risk exposure is increasing. (iii) KCIs focus on the current state to evaluate whether internal controls are functioning as intended.  

Chapter 17b (Continued from previous question): Analyze the 1-year transition matrix below: Starting Rating Ends as AA Ends as BB Ends as Default (D) AA 0.85 0.10 0.05 BB 0.15 0.65 0.20 Default (D) 0.00 0.00 1.00 Using the same transition matrix, evaluate the following statements regarding the compounded 2-year risk profile for a bond initially rated AA: (i) The cumulative probability that the bond will be in default by the end of Year 2 is 11.25%. (ii) The marginal probability that the bond survives the first year but defaults specifically during the second year is 6.25%. (iii) The probability of the bond experiencing a downgrade to BB in Year 1, followed by a recovery upgrade back to AA in Year 2, is 2.5%. Which of the statements above is/are accurate?

IMPORTANT: Please keep your entire face within the camera view during the entire exam. If your face is not within view, then your score on this retake exam may not replace your current lowest exam score. Before you start answering questions, please show both sides of your scratch paper to the camera so we can see that it is blank. Also, please show your entire desk surface, your lap, and the area behind your computer.