Name: Case Studies; Standards: Governance, Best Practices and Ethics
Brand: ValidExamDumps
SKU: 8004
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Free PRMIA 8004 Exam Actual Questions

The questions for 8004 were last updated On May 3, 2024

Question No. 1

A VaR model for managing market risk at Barings Bank in London would most likely have:

AAlerted senior management to the problems before the major losses occurred

BHelped very little as Nick Leeson hid many trades

CNot correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics

DBeen used if senior management had ever seen it

Show Answer

Correct Answer: B

Question No. 2

Which of the following is FALSE?

ANick Leeson also ran the back office for his trading area

BNick Leeson dealt in complex derivatives lacking transparency of pricing

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

DNick Leeson claimed to be running an arbitrage book

Show Answer

Correct Answer: B

Question No. 3

What is (are) the lesson(s) of the Barings' failure?

AIncentive plans have risk management implications

BFront and back offices need to be independent

CLarge profits can be an indicator of risk

DAll of the above

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Correct Answer: D

Question No. 4

Which of the following was a key problem in the Barings Bank case?

AHaving the back office and front office operations under the same person

BDifference in the contract sizes in the OSE and SIMEX

CThe different time zones that the office was trading in

DLeeson was executing an arbitrage strategy even though he was not authorized to do so

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Correct Answer: A

Question No. 5

Barings failed to recognize that Nick Leeson's losses were increasing because:

ALeeson ran the front office

BThe London office did not ask for any reports

CLeeson hid his trades in a suspense account

DThe margin report sent to London did not show the true margin needs

Show Answer

Correct Answer: C