SOA ERMEnterprise Risk Management (CERA / FSA cross-track)

Fellowship (FSA)

4 hours·8–10 written-answer questions·≈400 study hours

Score 0/0 · 5 MC

ERM · Q1
Multiple choice
Economic capital & capital allocation
Annual losses are normal with mean 50 and standard deviation 20. Using $z_{0.995}=2.576$ , calculate economic capital defined as $VaR_{99.5\%}$ minus expected loss.
ERM · Q2
Multiple choice
Economic capital & capital allocation
Two risk modules each require stand-alone capital of 100. Their correlation is 0.5. Calculate the diversification benefit from aggregating them with the square-root formula.
ERM · Q3
Multiple choice
Economic capital & capital allocation
A firm's total diversified economic capital is 300, and TVaR-based contributions of two business units are 180 and 120 (already summing to the total under Euler allocation). Calculate business unit 1's allocated capital as a percentage of the total.