Chapter 1

(1) Fill in the blanks:

(a) Risk and Return have _______relationship with each other.
(b) Market risk is more commonly known as ________risk.
(c) Equity risk is the risk that arises from ________ volatility.
(d) Interest rate risk is the risk that arises from ________of interest rates in economy.
(e) _________is risk due to possible changes in spreads.
[Ans.: (a) Direct; (b) systematic; (c) stock price; (d) Volatility;
(e) Basis risk]
(2) State True or False:
(a) Risk and uncertainty are one and same.
(b) In Risk Management the most critical role is of Chief Risk Officer (CRO).
(c) Market Risk is diversifiable.
(d) Impact cost is used to measure credit risk.
(e) Operating Exposure is kind of foreign exchange risk.
[Ans.: (a) False; (b) True; (c) False; (d) False; (e) True]

Chapter 2

(3) Match the columns:

Column A Column B
(a) Risk management (i) opposite exposure
(b) Exposure netting (ii) reduce financial threat
(c) Managing Liquidity Risk (iii) various assets
(d) Diversification (iv) Storing Liquidity
(e) Fixed income securities (v) Quantitative Risk
Measurement
(f) Sensitivity analysis (vi) Safe Investments
(g) Tornado diagrams (vii) flow diagram
(h) Decision tree analysis (viii) special type of Bar chart
(i) Derivatives (ix) hedge operating exposure
(j) Marketing Strategies (x) Futures and option
[Ans.: (a – ii); (b – i); (c – iv); (d – iii); (e – vi); (f – v);
(g – viii); (h – vii); (i – x); (j – ix)]

Chapter 3

(1) Fill in the blanks:

(a) __________ measures return on a portfolio over and above that predicted by CAPM.
(b) __________ is widely used measure to calculate market risk of a portfolio or security.
(c) __________ is a statistical measure that represents the percentage of a fund or security's
movements that can be explained by movements in a benchmark index.
(d) __________ is square root of variance of rate of return.
(e) __________ is a strategy that matches the durations of assets and liabilities.
(f) The __________ on Banking Supervision provides a forum for regular cooperation on banking
supervisory matters.
 (g) __________ is a computerized mathematical technique that allows people to account for risk in
quantitative analysis and decision making.
(h) __________ is defined as first order derivative of price with respect to interest rate.
(i) The __________ is the weighted average term to maturity of the cash flows from a bond.
(j) __________ is a formula that expresses the measurable change in the value of a security in
response to a change in interest rates.
[Ans.: (a) Jensen measure; (b) ; (c) R-squared;
(d) Standard deviation; (e) Risk Immunization; (f) Basel Committee; (g) Simulation; (h) Duration; (i)
Macaulay duration; (j) Modified duration]

Chapter 4

(2) Fill in the blanks:

(a) __________ is an agreement between two people or entities where settlement takes place on
future date at a price which is pre decided.
(b) __________ is an agreement between two people or entities where settlement takes place on
future date at price which is pre decided.
(c) Options are of two type call and __________.
(d) __________ is defined as an agreement where two parties agree to exchange cash flow on a
future date according to a predetermined arrangement.
(e) A call __________ gives its holder right to enter into a swap as a fixed rate payer.
[Ans.: (a) Forward; (b) Futures; (c) put; (d) Swap; (e) Swaption]
(3) True or False:
(a) A put swaption gives its holder right to enter into a swap as a floating rate payer.
(b) Lack of counterparty is not a limitations of swaps.
(c) In risk arbitrage the arbitrageur will buy all of the stocks of the underlying index and sell the futures
for the index.
(d) When foreign-based companies issue stock in their country, these are referred to as ordinary
shares (ORDs).
(e) The risk-return trade-off is the principle that potential return rises with an increase in risk.
[Ans.: (a) True; (b) False; (c) False; (d) True; (e) True]

Chapter 5

(4) Fill in the blanks:

(a) __________ improves an organization’s strategic decision making by addressing threats and
opportunities.
(b) __________ considers only hazard and operational risks that can affect an organization.
(c) COSO stands for __________.
(d) The matrix includes four categories of objectives across the top – strategic, operations,
__________.
(e) __________ analysis is a process that identifies the strengths, weaknesses, opportunities and
threats of an organization
(f) The risk register starts with a __________.
[Ans.: (a) ERM; (b) traditional risk management; (c) Committee of Sponsoring Organizations; (d)
reporting and compliance;
(e) SWOT; (f) risk management plan]
(5) True or false:
(a) ERM looks at additional risks such as environmental, compliance, financial and strategic.
(b) The COSO ERM Framework has four Components and four objectives categories.
 (c) ERM concepts in the process include the risk philosophy or risk strategy, risk culture and risk
appetite.
(d) The matrix includes four categories of objectives across the top – strategic, operations, reporting
and compliance.
[Ans.: (a) True; (b) False; (c) True; (d) True]

Chapter 6

(6) True or False:

(a) Risk Governance deals with increasingly complex business operations and activities.
(b) Better capital allocation involves identification of areas of redundancy.
(c) A risk management policy is approved by regional head.
(d) A planning process involving the preparation of business plans and rolling monthly
forecasts.
[Ans.: (a) True; (b) True; (c) False; (d) True]
(7) Match the column:
Column A Column B
(a) risk governance (i) Higher quality information
(b) GRC (ii) systemic approach
(c) Internal audit (iii) listing agreement
(d) Clause 49 (iv) corporate governance
(e) Process optimizations (v) own and manage risk
(f) first line of defence (vi) Non-value-added activities are
eliminated
[Ans.: (a – ii); (b – i); (c – iv); (d – iii); (e – vi); (f – v)]

Chapter 7

(8) Fill in the blanks:

(a) __________ service is an independent professional service with the goal of
improving information.
(b) Assurance services provide independent and professional opinions that reduce __________.
(c) There are basically __________ assurance reports widely known in Assurance Services.
(d) The overall responsibility for the selection of team members rests with the __________.
(e) __________ is fundamental for objective, unbiased and reliable audits.
(f) Many a times lack of __________ may act as a barrier in assurance services.
(g) The lower the level of knowledge and experience, the __________ the probability that an expert
may be required in the team.
(h) In __________, Practitioner shall always express inference in form of written reports.
[Ans.: (a) Risk Assurance; (b) information risk; (c) two; (d) team leader; (e) Auditor independence; (f)
benchmark criteria;
(g) Higher; (h) Risk Assurance]
(9) True or False:
(a) The level of assurance engagement risk is lower in a limited assurance engagement than in a
reasonable assurance engagement.
(b) Auditor independence is fundamental for objective, unbiased and reliable audits.
(c) In Risk Assurance, Practitioner may express inference in form of written or oral reports.
[Ans.: (a) False; (b) True; (c) False]
 Chapter 8

(10) Fill in the blanks:

(a) The _________ in a typical corporation are its investors, employees and customers.
(b) ______ are a common type of internal stakeholder and are greatly affected by the outcome of a
business.
(c) ________ are a little difficult to identify, as they do not have a direct relationship with the company.
(d) Government is an example of ___________.
(e) ________ expect quality service and adequate customer care service.
[Ans.: (a) primary stakeholders; (b) Investors; (c) External stakeholders; (d) external stakeholders; (e)
Customers]
(11) True or false:
(a) Customers looks to maximize their wealth.
(b) Some commonly known techniques to meet stakeholder’s expectations and managing
stakeholder’s risk includes analysing stakeholders.
(c) An increase in the number of stakeholders adds stress to the project and influences the project’s
complexity level.
(d) Stakeholders can be internal only.
(e) The most common investors are equity shareholders and bond holders.
[Ans.: (a) False; (b) True; (c) True; (d) False; (e) True]

Chapter 9

(12) Match the column:

Column A Column B
(a) Many multinational insurers (i) supervise insurance business
(b) Insurance Act (ii) joint venture or acquisition
(c) IRDA Reforms (iii) issuance of certificate of
registration
(d) Duties of IRDA (iv) protect the interest of
policyholders
[Ans.: (a – ii); (b – i); (c – iv); (d – iii)]
(13) True or False:
(a) An actuary is a professional dealing with the assessment and management of risk for financial
investments.
(b) Many multinational insurers are entering into developing countries either through joint venture or
through acquisition.
(c) Asia-Pacific presents lesser opportunities for insurers seeking growth.
(d) IRDA is the regulator of the insurance industry in India.
(e) SEBI protects interest of policyholders in India.
(f) Appeals against the orders of IRDAI are to be preferred to SAT.
[Ans.: (a) True; (b) True; (c) False; (d) True; (e) True]

Chapter 10

(14) Fill in the blanks:

(a) __________ is a contract between two parties, the insured and the insurer.
 (b) __________ provides life insurance coverage for a specified term.
(c) ULIP stands for __________.
(d) Non-life insurance policies are also known as ________.
(e) __________ also known as insurance for insurers or stop-loss insurance
(f) Under __________, the reinsurer receives a prorated share of the premiums of all policies sold
by the insurer.
(g) __________ is an arrangement between a bank and an insurance company.
(h) __________ is a type of non-proportional coverage in which the reinsurer covers the losses
exceeding the insurer's retained limit.
[Ans.: (a) Life Insurance; (b) Term assurance/insurance; (c) Unit Linked Insurance Plan; (d) General
insurance; (e) Reinsurance;
(f) proportional reinsurance; (g) Bancassurance; (h) Excess-of-loss reinsurance]
(15) State True or False:
(a) Alternative risk transfer enables companies to transfer risks to another party or to capital markets
investors.
(b) The pure premium, which is determined by actuarial studies, consists of that part of the premium
necessary to pay for claims and claims related expenses.
(c) An insurance claim is a formal request to an insurance company asking for a payment based on
the terms of the government policy.
[Ans.: (a) True; (b) True; (c) False]

Chapter 11

(16) Fill in the blanks:

(a) As per IRDA regulation surveyor to be appointed within __________ hours.
(b) If the insured person dies during the term of the policy, the __________ arises.
(c) Policy is suitable for the owner of a property, one who holds property in trust or in commission,
individuals/ financial institutions who have financial interest in the property.
(d) In many countries the third party liability cover is broken in two parts, viz.; third party bodily injury
and __________.
(e) __________ refers to amount that equals expected costs, including a fair return to capital.
[Ans.: (a) 72; (b) death claim; (c) Fire insurance; (d) third party property damage; (e) Fair Premium]
(17) True or False:
(a) Surveyor shall communicate his findings to the insurer within 20 days of his appointment.
(b) A life insurance company, upon receiving a claim, shall process the claim after 10 days.
(c) Marine Insurance is a system of financial protection against the happenings of accidental during
sea transportation.
(d) A marine insurance policy undertakes to insure (cover) the insured in the event of a loss caused
by an insured risk.
(e) The premium that just covers expected claim costs is called the pure premium.
[Ans.: (a) False; (b) False; (c) True; (d) True; (e) True]