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NEW QUESTION: 1
Which of the following risks were not covered in detail in most stress tests prior to the current crisis:
I. The behavior of complex structured products under stressed liquidity conditions II. Pipeline or securitization risk III. Basis risk in relation to hedging strategies IV. Counterparty credit risk
V. Contingent risks
VI. Funding liquidity risk
A. I, IV and VI
B. I, II, III, IV and VI
C. II, III and V
D. All of the above
Answer: D
Explanation:
Explanation
The BCBS publication 'Principles for sound stress testing practices and supervision' (May 2009) identifies all of the above as risks that were covered in insufficient detail in most stress tests prior to the current crisis.
Therefore Choice 'd' is the correct answer.
For the PRM exam, you should have read this document. You should also be familiar with all the above risk types as being contributors to the crisis, and know what each of these mean.

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