When fitting a distribution in excess of a threshold as part of the body-tail distribution method described by the equation below, how is the parameter 'p' calculated.

Here, F(x) is the severity distribution. F(Tail) and F(Body) are the parametric distributions selected for the tail and the body, and T is the threshold in excess of which the tail is considered to begin.

• A. If there are N observations, of which K are up to T, then p = k/N
• B. If there are K observations up to the tail threshold, then p = k*n
• C. p is a parameter estimated using either the sum of least squares or maximum likelihood estimation
• D. p is a function of the reporting threshold and determined by the log-likelihood functional

An investor enters into a 5-year total return swap with Bank A, with the investor paying a fixed rate of 6% annually on a notional value of $100m to the bank and receiving the returns of the S&P500 index with an identical notional value. The swap is reset monthly, ie the payments are exchanged monthly. On Jan 1 of the fourth year, after settling the last month's payments, the bank enters bankruptcy. What is the legal claim that the hedge fund has against the bank in the bankruptcy court?

• A. $0, as all payments on the swap are current
• B. $100m
• C. The replacement value of the swap
• D. $6m

Which of the following statements are true in relation to Historical Simulation VaR?
I. Historical Simulation VaR assumes returns are normally distributed but have fat tails II. It uses full revaluation, as opposed to delta or delta-gamma approximations III. A correlation matrix is constructed using historical scenarios IV. It particularly suits new products that may not have a long time series of historical data available

• A. All of the above
• B. II and III
• C. I and IV
• D. II

Which of the following are considered counterparty based credit enhancements?
I. Collateral
II. Credit default swaps
III. Close out netting arrangements
IV. Guarantees

• A. I and III
• B. I and IV
• C. I, II and IV
• D. II and IV

Which of the following belong in a credit risk report?

• A. All of the above
• B. Exposures by country
• C. Exposures by industry
• D. Largest exposures by counterparty