AS-05 (v) Actuarial Aspects of Risk Management Mock Test 04
This section covers advanced actuarial risk management concepts, including stochastic simulation, enterprise risk strategies, capital structure, duration-based immunisation, and regulatory risk assessment. It explains how stochastic models rely on probability distributions and expert judgment rather than only historical data. The chapter discusses risk response strategies such as acceptance, mitigation, avoidance, and transfer, while emphasizing the growing importance of systemic risk in financial regulation. It also introduces EBIT/EPS analysis, the DGAP framework for asset-liability management, vulnerability assessment, and the structured steps of risk assessment to support informed decision-making, financial stability, and effective enterprise risk management.
1. How do stochastic simulation models differ from multivariate statistical models?
A. They require more hard data
B. They are qualitative
C. They are always more accurate
D. They require regulatory approval
E. They are typically not based on hard data but on subjective assessments of probability distributions
2. Under which strategy do the project manager and team decide to accept certain risks and do not change the project plan?
A. Avoidance
B. Transference
C. Acceptance
D. Mitigation
E. Optimisation
3. It is likely that global scenarios will play an increasing role in regulation in the future due to the emphasis on:
A. Tax efficiency
B. Brand value
C. Systemic risk and the linkages between different economic sectors
D. Single-event risks
E. Marketing
4. Which model is based on the relationship between intensity of risky events and the level of risk control?
A. Model Frequency Control (MFC)
B. Model Loss Control (MLC)
C. Model Top Ten (MTT)
D. Model Value at Risk (MVaR)
E. Model Beta (MB)
5. In the EBIT/EPS analysis example, at a level of $2 million EBIT, the EPS is what under either the stock or debt financing plan?
A. Always higher under debt
B. Always higher under stock
C. Always zero
D. Always negative
E. The same
6. In the DGAP framework, Kliabilities represents:
A. The credit spread
B. Total liabilities in rupees
C. The maturity in years
D. Percentage of assets funded by liabilities
E. The interest rate
7. Immunisation through duration is described as which type of strategy?
A. A marketing strategy
B. A hedging or risk-minimisation strategy
C. A speculative strategy
D. A tax-avoidance strategy
E. A profit-maximisation strategy
8. What is the sixth step in performing a risk assessment?
A. Identify objectives
B. Determine risk tolerance
C. Evaluate the portfolio
D. Identify events
E. Assess residual likelihood and impact of risks
9. Under the MM view, an increase in debt level will cause the cost of debt to do what, while the average cost of capital remains constant?
A. Decrease to zero
B. Increase
C. Disappear
D. Stay exactly the same
E. Become negative
10. 'Vulnerability' is defined as the intrinsic properties of something resulting in susceptibility to a risk source that can lead to:
A. An event with a consequence
B. A guaranteed profit
C. A regulatory approval
D. A new stakeholder
E. A reduced premium
