National Institute of
Bank Management
Dashboard My courses RSK MGMT MODULE III: MANAGEMENT OF RISK IN BANK PORTFOLIOS - CREDIT RISK
Chapter 2: Quiz
Started on Sunday, 17 December 2023, 6:14 PM
State Finished
Completed on Sunday, 17 December 2023, 6:19 PM
Time taken 4 mins 41 secs
Question 1 Correct Mark 1.00 out of 1.00
Mortality rate analysis involves study of movement of firms from
Select one:
a. Any rating category to the next lower category
b. Any rating category to default category
c. Any rating category to the same category
d. Any rating category to another category
The correct answer is: Any rating category to default category
Question 2 Correct Mark 1.00 out of 1.00
If two assets are independent, their joint default probability (JDP) would be:
Select one:
a. Zero
b. Infinity
c. Negative
d. Positive
The correct answer is: Zero
Question 3 Correct Mark 1.00 out of 1.00
If the individual default probability of two borrowers increase, then then their default
correlation is likely to
Select one:
a. Increase
b. Decrease
c. Remain equal
d. May increase or decrease
The correct answer is: Decrease
Question 4 Correct Mark 1.00 out of 1.00
Which one of the following is taken for determining the default correlation for a portfolio of
credit assets
Select one:
a. Parameteric correlation
b. Partial correlation
c. None of the given options
d. Pair wise correlation
The correct answer is: Pair wise correlation
Question 5 Correct Mark 1.00 out of 1.00
One limitation of the formula for determining the default correlation between a pair of credit
assets in a portfolio is that
Select one:
a. Constant PD of firms as well as constant JPD between them
b. Constant PD of individual firms only
c. Constant JPD between firms only
d. None of such assumptions are made
The correct answer is: Constant PD of firms as well as constant JPD between them
Question 6 Correct Mark 1.00 out of 1.00
Default correlation is which dimension of credit risk?
Select one:
a. 1st
b. 3rd
c. 2nd
d. 4th
The correct answer is: 3rd
Question 7 Correct Mark 1.00 out of 1.00
If Ti is the number of firms defaulting in the ith rating grade in a year, Ni is number of firms in
the ith grade and N is total number of firms in the portfolio, then the One year PD of the ith
rating grade is
Select one:
a. Ti / (N - Ni)
b. Ti / Ni
c. Ti / N
d. Ti / ( 1 - Ni / N )
The correct answer is: Ti / Ni
Question 8 Correct Mark 1.00 out of 1.00
If the joint probability of default of two credit assets in a portfolio is larger than the product of
their univariate probabilities of default, then their default correlation will be
Select one:
a. Unrelated
b. Negative
c. Positive
d. Equal
The correct answer is: Positive
Question 9 Correct Mark 1.00 out of 1.00
How many different pairs of default correlations can be created from a given portfolio with N
credits of similar grades
Select one:
a. N * (N - 1) / 2
b. N * (N + 1) / 2
c. N / (2N + 1)
d. N / (2N - 1)
The correct answer is: N * (N - 1) / 2
Question 10 Correct Mark 1.00 out of 1.00
Estimate the default correlation between two borrowers whose joint default probability is
0.06%, while the individual probability of default are 0.70% and 2%
Select one:
a. 2.94%
b. 3.94%
c. -3.94%
d. -2.94%
The correct answer is: -3.94%