Get All Operational Risk Manager (ORM) Exam Questions with Validated Answers
| Vendor: | PRMIA |
|---|---|
| Exam Code: | 8010 |
| Exam Name: | Operational Risk Manager (ORM) Exam |
| Exam Questions: | 241 |
| Last Updated: | July 9, 2026 |
| Related Certifications: | Operational Risk Management |
| Exam Tags: |
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Under the standardized approach to calculating operational risk capital under Basel II, negative regulatory capital charges for any of the business units:
According to Basel II, in any given year, negative capital charges (resulting from negative gross income) in any business line may offset positive capital charges in other business lines without limit. Therefore Choice 'b' is the correct answer.
If the cumulative default probabilities of default for years 1 and 2 for a portfolio of credit risky assets is 5% and 15% respectively, what is the marginal probability of default in year 2 alone?
One way to think about this question is this: we are provided with two pieces of information: if the portfolio is worth $100 to start with, it will be worth $95 at the end of year 1 and $85 at the end of year 2. What it is asking for is the probability of default in year 2, for the debts that have survived year 1. This probability is $10/$95 = 10.53%. Choice 'b' is the correct answer.
Note that marginal probabilities of default are the probabilities for default for a given period, conditional on survival till the end of the previous period. Cumulative probabilities of default are probabilities of default by a point in time, regardless of when the default occurs. If the marginal probabilities of default for periods 1, 2... n are p1, p2...pn, then cumulative probability of default can be calculated as Cn = 1 - (1 - p1)(1-p2)...(1-pn). For this question, we can calculate the probability of default for year 2 as [1 - (1 - 5%)(1 - 10.53%)] = 15%.
Which of the following contributed to the systemic failure during the credit crisis that began in 2007?
All the factors listed above contributed to systemic failure. Liquidity risk was not on the radar of regulators, and was a second priority for risk managers, and most of the focus was on capital adequacy as liquidity was thought to be an unlikely problem. Liquidity, regardless of capital adequacy, was the primary cause of failure of a number of institutions during the crisis.
Similarly, stress tests proved to be much milder than the shocks that were actually experienced, and the strategy of 'originate and distribute' implied that the mortgage and other debt originators had no interest in any due diligence as they intended to package and sell the debt to other investors.
Therefore Choice 'd' is the correct answer.
Which of the following best describes a 'break clause ?
A break close, also called a 'mutual put', gives either party the right to terminate a transaction at market price at a given date, or dates in the future. These are usually availed of in longer dated transactions, eg 10 years and over. For example, a 15-year swap might have a mutual put in year 5, and every 2 years thereafter.
All other choices are incorrect.
There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the two?
Probability of the joint default of both A and B =
We know all the numbers except default correlation, and we can solve for it.
Default Correlation*SQRT(0.03*(1 - 0.03)*0.08*(1 - 0.08)) + 0.03*0.08 = 0.014.
Solving, we get default correlation = 25%
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