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1. ### P1.T2.20.8. Probability matrix

Learning objectives: Explain how a probability matrix can be used to express a probability mass function. Compute the marginal and conditional distributions of a discrete bivariate random variable. Explain how the expectation of a function is computed for a bivariate discrete random variable...
2. ### P2.T7.20.11. High-level summary of Basel III reforms

Learning objectives: Explain the motivations for revising the Basel III framework and the goals and impacts of the December 2017 reforms to the Basel III framework. Summarize the December 2017 revisions to the Basel III framework in the following areas: The standardized approach to credit risk...
3. ### P1.T2.20.7. Common univariate random variables (student's t, F-distribution, mixture)

Distinguish the key properties and identify the common occurrences of the following distributions: Student’s t and F-distributions ... Describe a mixture distribution and explain the creation and characteristics of mixture distributions. Questions: 20.7.1. Let X = µ + σ*T be the generalized...
4. ### P2.T7.20.10. Solvency, liquidity and other regulation after the global financial crisis (2 of 2)

Learning objectives: Describe the motivations for and calculate the capital conservation buffer and the countercyclical buffer, including special rules for globally systemically important banks (G-SIBs). Describe and calculate ratios intended to improve the management of liquidity risk...
5. ### P1.T2.20.6. Common univariate random variables (normal, lognormal, chi-squared)

Distinguish the key properties and identify the common occurrences of the following distributions: normal distribution, lognormal distribution, chi-squared distribution ... Questions: 20.6.1. A hedge fund's big data algorithm can predict the market's direction on five out of eight days...

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7. ### P2.T7.20.9. Solvency, liquidity and other regulation after the global financial crisis (1of 2)

Learning objectives: Describe and calculate the stressed VaR introduced in Basel 2.5 and calculate the market risk capital charge. Explain the process of calculating the incremental risk capital charge for positions held in a bank’s trading book. Describe the comprehensive risk (CR) capital...
8. ### P1.T2.20.5. Common univariate random variables (uniform, Bernoulli, binomial, and Poisson)

Learning objectives: Distinguish the key properties and identify the common occurrences of the following distributions: uniform distribution, Bernoulli distribution, binomial distribution, Poisson distribution ... Questions: 20.5.1. Assume two continuous uniform random variables, X ~ U(a1, b1)...
9. ### P2.T7.20.8. Capital regulation before the global financial crisis (2nd of 2)

Learning objectives: Describe changes to the Basel regulations made as part of Basel II, including the three pillars. Compare the standardized IRB approach, the Foundation Internal Ratings-Based (IRB) approach and the advanced IRB approach for the calculation of credit risk capital under Basel...
10. ### IMPORTANT Website Maintenance Planned on June 6th

Please note that we will be performing planned website maintenance on June 6th at 1:00 a.m. EST. The website will be unavailable during this time. We do not expect the website to be offline for more than 15 minutes, but please note that it may take up to one hour. We appreciate your patience...
11. ### P1.T2.20.4. Random variables (2nd of 2)

Learning objectives: Explain the differences between a probability mass function and a probability density function. Characterize the quantile function and quantile-based estimators. Explain the effect of a linear transformation of a random variable on the mean, variance, standard deviation...
12. ### P2.T7.20.7. Capital regulation before the global financial crisis (1st of 2)

Learning objectives: Explain the motivations for introducing the Basel regulations, including key risk exposures addressed and explain the reasons for revisions to Basel regulations over time. Explain the calculation of risk-weighted assets and the capital requirement per the original Basel I...
13. ### P1.T2.20.3. Random variables (first of two)

Learning objectives: Describe and distinguish a probability mass function from a cumulative distribution function and explain the relationship between these two. Understand and apply the concept of a mathematical expectation of a random variable. Describe the four common population moments...
14. ### P2.T7.20.6. Regulation of OTC derivatives market (Hull Ch.17)

Learning objectives: Summarize the clearing process in OTC derivative markets. Describe changes to the regulation of OTC derivatives which took place after the 2007-2009 financial crisis and explain the impact of these changes. Questions: 20.6.1. The diagram below plots the exposures of three...
15. ### P1.T2.20.2. More probabilities and Bayes rule

Learning objectives: Calculate the probability of an event for a discrete probability function. Define and calculate a conditional probability. Distinguish between conditional and unconditional probabilities. Explain and apply Bayes’ rule. Questions: 20.2.1. The probability graph below...
16. ### P2.T7.20.5. Management of risks associated with money laundering and financing of terrorism (ML/FT) (Carey)

Learning objectives: Explain best practices recommended for the assessment, management, mitigation, and monitoring of money laundering and financial terrorism (ML/FT) risks. Questions: 20.5.1. A person named Jack Ryan has applied to open a new account at Quadstreet International Bank. The bank...
17. ### P1.T2.20.1. Conditionally independent events

Learning objectives: Describe an event and an event space. Describe independent events and mutually exclusive events. Explain the difference between independent events and conditionally independent events. Questions: 20.1.1. A specialized credit portfolio contains only three loans but they are...
18. ### P2.T7.20.4. Validating Rating Models (De Laurentis)

Learning objectives: Explain the process of model validation and describe best practices for the roles of internal organizational units in the validation process. Compare qualitative and quantitative processes to validate internal ratings and describe elements of each process. Describe...
19. ### P1.T1.20.18. GARP Code of Conduct

Learning objectives: Describe the responsibility of each GARP Member with respect to professional integrity, ethical conduct, conflicts of interest, confidentiality of information and adherence to generally accepted practices in risk management. Describe the potential consequences of violating...
20. ### P2.T7.20.3. Model risk management (according to FDIC)

Learning objectives: Describe model risk and explain how model risk can arise in the implementation of a model. Describe elements of an effective process to manage model risk. Explain best practices for the development and implementation of a model. Describe elements of a strong model validation...