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Risk Management Practices 8008 Valid Questions

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PRM Certification – Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP-2015 Edition 8008 exam is one related test for PRM certification. We have cracked the latest Risk Management Practices 8008 valid questions, which are valuable for you to pass the test. PRM certification 8008 exam tests your knowledge and understanding of the modern risk management theory and practices. 8008 exam tests the following 6 parts:

Risk Management Frameworks
Operational Risk
Credit Risk
Counterparty Credit Risk
Market Risk
Asset Liability Management and Funds Transfer Pricing

The new cracked Risk Management Practices 8008 valid questions are the best study guides. Share some free Risk Management Practices 8008 valid questions below.

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1. Which of the following statements is true:

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2. Which of the following is the best description of the spread premium puzzle:

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3. Which of the following are true:

I. The total of the component VaRs for all components of a portfolio equals the portfolio VaR.

II. The total of the incremental VaRs for each position in a portfolio equals the portfolio VaR.

III. Marginal VaR and incremental VaR are identical for a $1 change in the portfolio.

IV. The VaR for individual components of a portfolio is sub-additive, ie the portfolio VaR is less than (or in extreme cases equal to) the sum of the individual VaRs.

V. The component VaR for individual components of a portfolio is sub-additive, ie the portfolio VaR is less than the sum of the individual component VaRs.

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4. A risk analyst analyzing the positions for a proprietary trading desk determines that the combined annual variance of the desk's positions is 0.16. The value of the portfolio is $240m.

What is the 10-day stand alone VaR in dollars for the desk at a confidence level of 95%? Assume 250 trading days in a year.

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5. Which of the following contributed to the systemic failure during the credit crisis that began in 2007?

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6. As the persistence parameter under GARCH is lowered, which of the following would be true:

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7. Which of the following formulae describes CVA (Credit Valuation Adjustment)? All acronyms have their usual meanings (LGD=Loss Given Default, ENE=Expected Negative Exposure, EE=Expected Exposure, PD=Probability of Default, EPE=Expected Positive Exposure, PFE=Potential Future Exposure)

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8. The risk that a counterparty fails to deliver its obligation upon settlement while having received the leg owed to it is called:

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9. The returns for a stock have a monthly volatilty of 5%. Calculate the volatility of the stock over a two month period, assuming returns between months have an autocorrelation of 0.3.

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10. An error by a third party service provider results in a loss to a client that the bank has to make up. Such as loss would be categorized per Basel II operational risk categories as:

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11. The Altman credit risk score considers:

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12. Which of the formulae below describes incremental VaR where a new position 'm' is added to the portfolio? (where p is the portfolio, and V_i is the value of the i-th asset in the portfolio. All other notation and symbols have their usual meaning.)

A)





B)





C)





D)



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13. What does a middle office do for a trading desk?

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14. Once the frequency and severity distributions for loss events have been determined, which of the following is an accurate description of the process to determine a full loss distribution for operational risk?

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15. Which of the following statements are true:

I. Capital adequacy implies the ability of a firm to remain a going concern

II. Regulatory capital and economic capital are identical as they target the same objectives

III. The role of economic capital is to provide a buffer against expected losses

IV. Conservative estimates of economic capital are based upon a confidence level of 100%

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16. For the purposes of calculating VaR, an interest rate swap can be modeled as a combination of:

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17. Under the standardized approach to determining operational risk capital, operations risk capital is equal to:

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18. Which of the following statements is correct in relation to liquidity risk management?

I. Pricing for products that do not impact the balance sheet need not reflect the cost of maintaining liquidity

II. Time horizons for liquidity risk management are impacted by both regulatory requirements and the speed at which new sources of liquidity can be tapped

III. Collateral management is an important aspect of liquidity risk management

IV. The maturity period of various instruments in the capital structure has a significant impact on liquidity needs

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19. According to the Basel framework, reserves resulting from the upward revaluation of assets are considered a part of:

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20. Which of the following is not one of the 'three pillars' specified in the Basel accord:

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21. Which of the following statements is true:

I. Basel II requires banks to conduct stress testing in respect of their credit exposures in addition to stress testing for market risk exposures

II. Basel II requires pooled probabilities of default (and not individual PDs for each exposure) to be used for credit risk capital calculations

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22. Under the KMV Moody's approach to credit risk measurement, which of the following expressions describes the expected 'default point' value of assets at which the firm may be expected to default?

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23. Which of the following attributes of an investment are affected by changes in leverage:

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24. The estimate of historical VaR at 99% confidence based on a set of data with 100 observations will end up being:

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25. Which of the following is not a tool available to financial institutions for managing credit risk:

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26. Which of the following statements is true?

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27. A bank expects the error rate in transaction data entry for a particular business process to be 0.005%.

What is the range of expected errors in a day within +/- 2 standard deviations if there are 2,000,000 such transactions each day?

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28. For a hypotherical UoM, the number of losses in two non-overlapping datasets is 24 and 32 respectively. The Pareto tail parameters for the two datasets calculated using the maximum likelihood estimation method are 2 and 3.

What is an estimate of the tail parameter of the combined dataset?

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29. Company A issues bonds with a face value of $100m, sold at $98. Bank B holds $10m in face of these bonds acquired at a price of $70. Company A then defaults, and the recovery rate is expected to be 30%.

What is Bank B's loss?

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30. A financial institution is considering shedding a business unit to reduce its economic capital requirements.

Which of the following is an appropriate measure of the resulting reduction in capital requirements?

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31. Which of the following statements are correct?

I. A reliance upon conditional probabilities and a-priori views of probabilities is called the 'frequentist' view

II. Knightian uncertainty refers to things that might happen but for which probabilities cannot be evaluated

III. Risk mitigation and risk elimination are approaches to reacting to identified risks

IV. Confidence accounting is a reference to the accounting frauds that were seen in the past decade as a reflection of failed governance processes

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32. The degree distribution of the nodes of the financial network is:

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33. A bank's detailed portfolio data on positions held in a particular security across the bank does not agree with the aggregate total position for that security for the bank.

What data quality attribute is missing in this situation?

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34. An assumption regarding the absence of ratings momentum is referred to as:

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35. A loan portfolio's full notional value is $100, and its value in a worst case scenario at the 99% level of confidence is $65. Expected losses on the portfolio are estimated at 10%.

What is the level of economic capital required to cushion unexpected losses?

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36. A derivative contract has a negative current replacement value.

Which of the following statements is true about its loan equivalent value for credit risk calculations over a 2-year horizon?

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37. For a corporate bond, which of the following statements is true:

I. The credit spread is equal to the default rate times the recovery rate

II. The spread widens when the ratings of the corporate experience an upgrade

III. Both recovery rates and probabilities of default are related to the business cycle and move in opposite directions to each other

IV. Corporate bond spreads are affected by both the risk of default and the liquidity of the particular issue

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38. Which of the following statements is true:

I. If the sum of its parameters is less than one, GARCH is a mean reverting model of volatility, while EWMA is never mean reverting

II. Standardized returns under both EWMA and GARCH show less non-normality than non standardized returns

III. Steady state variance under GARCH is affected only by the persistence coefficient

IV. Good risk measures are always sub-additive

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39. A portfolio's 1-day VaR at the 99% confidence level is $250m.

What is the annual volatility of the portfolio? (assuming 250 days in the year)

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40. A risk management function is best organized as:

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41. A stock that follows the Weiner process has its future price determined by:

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42. A corporate bond has a cumulative probability of default equal to 20% in the first year, and 45% in the second year.

What is the monthly marginal probability of default for the bond in the second year, conditional on there being no default in the first year?

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43. If the 99% VaR of a portfolio is $82,000, what is the value of a single standard deviation move in the portfolio?

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44. An operational loss severity distribution is estimated using 4 data points from a scenario. The management institutes additional controls to reduce the severity of the loss if the risk is realized, and as a result the estimated losses from a 1-in-10-year losses are halved. The 1-in-100 loss estimate however remains the same.

What would be the impact on the 99.9th percentile capital required for this risk as a result of the improvement in controls?

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45. The probability of default of a security during the first year after issuance is 3%, that during the second and third years is 4%, and during the fourth year is 5%.

What is the probability that it would not have defaulted at the end of four years from now?

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46. Which of the following objectives are targeted by rating agencies when assigning ratings:

I. Ratings accuracy

II. Ratings stability

III. High accuracy ratio (AR)

IV. Ranked ratings

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47. A zero coupon corporate bond maturing in an year has a probability of default of 5% and yields 12%. The recovery rate is zero.

What is the risk free rate?

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48. The sensitivity (delta) of a portfolio to a single point move in the value of the S&P500 is $100. If the current level of the S&P500 is 2000, and has a one day volatility of 1%, what is the value-at-risk for this portfolio at the 99% confidence and a horizon of 10 days?

What is this method of calculating VaR called?

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49. Which of the following distributions is generally not used for frequency modeling for operational risk

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50. Which of the following statements are true in relation to Principal Component Analysis (PCA) as applied to a system of term structures?

I. The factor weights on the first principal component will show whether there is common trend in the system

II. The factors to be applied to principal components are obtained from eigenvectors of the correlation matrix

III. PCA is a standard method for reducing dimensionality in data when considering a large number of correlated variables

IV. The smallest absolute eigenvalues and their associated eigenvectors are the most useful for explaining most of the variation

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51. Under the internal ratings based approach for risk weighted assets, for which of the following parameters must each institution make internal estimates (as opposed to relying upon values determined by a national supervisor):

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52. In setting confidence levels for VaR estimates for internal limit setting, it is generally desirable:

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53. A bank holds a portfolio of corporate bonds. Corporate bond spreads widen, resulting in a loss of value for the portfolio. This loss arises due to:

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54. As opposed to traditional accounting based measures, risk adjusted performance measures use which of the following approaches to measure performance:

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55. Which of the following should be included when calculating the Gross Income indicator used to calculate operational risk capital under the basic indicator and standardized approaches under Basel II?

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56. Which of the following are a CRO's responsibilities:

I. Statutory financial reporting

II. Reporting to the audit committee

III. Compliance with risk regulatory standards

IV. Operational risk

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57. Which of the following belong to the family of generalized extreme value distributions:

I. Frechet

II. Gumbel

III. Weibull

IV. Exponential

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58. When modeling severity of operational risk losses using extreme value theory (EVT), practitioners often use which of the following distributions to model loss severity:

I. The 'Peaks-over-threshold' (POT) model

II. Generalized Pareto distributions

III. Lognormal mixtures

IV. Generalized hyperbolic distributions

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59. When compared to a high severity low frequency risk, the operational risk capital requirement for a low severity high frequency risk is likely to be:

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60. Which of the following statements are true:

I. Shocks to risk factors should be relative rather than absolute if we wish to avoid a change in the sign of the risk factor.

II. Interest rate shocks are generally modeled as absolute shocks.

III. Shocks to volatility are generally modeled as absolute shocks.

IV. Shocks to market spreads are generally modeled as relative shocks.

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61. Which of the following statements are true:

I. It is usual to set a very high confidence level when estimating VaR for capital requirements.

II. For model validation, very high VaR confidence levels are used to minimize excess losses.

III. For limit setting for managing day to day positions, it is usual to set VaR confidence levels that are neither too low to be exceeded too often, nor too high as to be never exceeded.

IV. The Basel accord requirements for market risk capital require the use of a time horizon of 1 year.

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62. A portfolio has two loans, A and B, each worth $1m. The probability of default of loan A is 10% and that of loan B is 15%. The probability of both loans defaulting together is 1%. Calculate the expected loss on the portfolio.

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63. When performing portfolio stress tests using hypothetical scenarios, which of the following is not generally a challenge for the risk manager?

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64. CreditRisk+, the actuarial model for calculating portfolio credit risk, is based upon:

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65. Which of the following statements are true ?

I. Risk governance structures distribute rights and responsibilities among stakeholders in the corporation

II. Cybernetics is the multidisciplinary study of cyber risk and control systems underlying information systems in an organization

III. Corporate governance is a subset of the larger subject of risk governance

IV. The Cadbury report was issued in the early 90s and was one of the early frameworks for corporate governance

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66. Which of the following assumptions underlie the 'square root of time' rule used for computing VaR estimates over different time horizons?

I. the portfolio is static from day to day

II. asset returns are independent and identically distributed (i.i.d.)

III. volatility is constant over time

IV. no serial correlation in the forward projection of volatility

V. negative serial correlations exist in the time series of returns VI. returns data display volatility clustering

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67. Which of the following statements are true?

I. Retail Risk Based Pricing involves using borrower specific data to arrive at both credit adjudication and pricing decisions

II. An integrated 'Risk Information Management Environment' includes two elements - people and processes

III. A Logical Data Model (LDM) lays down the relationships between data elements that an organization stores

IV. Reference Data and Metadata refer to the same thing

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68. Which of the following is the most important problem to solve for fitting a severity distribution for operational risk capital:

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69. Which of the following statements are true:

I. A transition matrix is the probability of a security migrating from one rating class to another during its lifetime.

II. Marginal default probabilities refer to probabilities of default in a particular period, given survival at the beginning of that period.

III. Marginal default probabilities will always be greater than the corresponding cumulative default probability.

IV. Loss given default is generally greater when recovery rates are low.

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70. For a group of assets known to be positively correlated, what is the impact on economic capital calculations if we assume the assets to be independent (or uncorrelated)?

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71. For credit risk calculations, correlation between the asset values of two issuers is often proxied with:

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72. Which of the following cannot be used to address the issue of heavy tails when modeling market returns

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73. Which of the following are attributes of a robust stress testing programme at a bank?

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74. For the purposes of calculating VaR, an FRA can be modeled as a combination of:

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75. For a given notional amount, which of the following carries the greatest counterparty exposure (assuming the same counterparty credit rating for each):

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76. The 99% 10-day VaR for a bank is $200mm. The average VaR for the past 60 days is $250mm, and the bank specific regulatory multiplier is 3.

What is the bank's basic VaR based market risk capital charge?

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77. Which of the following statements is true in relation to a normal mixture distribution:

I. Normal mixtures represent one possible solution to the problem of volatility clustering

II. A normal mixture VaR will always be greater than that under the assumption of normally distributed returns

III. Normal mixtures can be applied to situations where a number of different market scenarios with different probabilities can be expected

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78. Which of the following statements are true in relation to Monte Carlo based VaR calculations:

I. Monte Carlo VaR relies upon a full revalution of the portfolio for each simulation

II. Monte Carlo VaR relies upon the delta or delta-gamma approximation for valuation

III. Monte Carlo VaR can capture a wide range of distributional assumptions for asset returns

IV. Monte Carlo VaR is less compute intensive than Historical VaR

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79. The systemic manifestation of the liquidity crisis during the current credit crisis took many forms.

Which of the following is not one of those forms?

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80. Calculate the 1-year 99% credit VaR of a portfolio of two bonds, each with a value of $1m, and the probability of default of 1% each over the next year. Assume the recovery rate to be zero, and the defaults of the two bonds to be uncorrelated to each other.

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81. Which of the following statements is correct?

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82. When estimating the risk of a portfolio of equities using the portfolio's beta, which of the following is NOT true:

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83. Which of the following is additive, ie equal to the sum of its components

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84. If the loss given default is denoted by L, and the recovery rate by R, then which of the following represents the relationship between loss given default and the recovery rate?

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85. Conditional default probabilities modeled under CreditPortfolio view use a:

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86. CORRECT TEXT

Which of the below are a way to classify risk governance structures:

A Reactive, Preventative and Active

B. Committee based, regulation based and board mandated

C. Top-down and Bottom-up

D. Active and Passive

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87. Under the ISDA MA, which of the following terms best describes the netting applied upon the bankruptcy of a party?

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88. Which of the following steps are required for computing the total loss distribution for a bank for operational risk once individual UoM level loss distributions have been computed from the underlhying frequency and severity curves:

I. Simulate number of losses based on the frequency distribution

II. Simulate the dollar value of the losses from the severity distribution

III. Simulate random number from the copula used to model dependence between the UoMs

IV. Compute dependent losses from aggregate distribution curves

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89. Concentration risk in a credit portfolio arises due to:

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90. The key difference between 'top down models' and 'bottom up models' for operational risk assessment is:

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91. Fill in the blank in the following sentence:

Principal component analysis (PCA) is a statistical tool to decompose a ____________ matrix into its principal components and is useful in risk management to reduce dimensions.

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92. Which of the following best describes the concept of marginal VaR of an asset in a portfolio:

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93. CORRECT TEXT

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

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94. All else remaining the same, an increase in the joint probability of default between two obligors causes the default correlation between the two to:

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95. For a loan portfolio, expected losses are charged against:

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96. Under the contingent claims approach to measuring credit risk, which of the following factors does NOT affect credit risk:

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97. Which of the following are likely to be useful to a risk manager analyzing liquidity risk for an international bank?

I. Information on liquidity mismatches

II. Funding concentration

III. Lending concentration

IV. A report on illiquid assets

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98. If A and B be two debt securities, which of the following is true?

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99. Which of the following is true in relation to a Contingency Funding Plan (CFP)?

I. A CFP is like a disaster recovery plan to deal with a liquidity crisis

II. A CFP should consider market stress conditions, but failures of payment systems are not relevant as they fall under the remit of operational risk

III. Reputational damage may result if the market finds out that a firm has had to execute its

CFP

IV. Sources of emergency funding considered in the CFP should include the role of the central bank as the lender of last resort

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100. Stress testing is useful for which of the following purposes:

I. For providing the risk manager with an intuitive check on his risk estimates

II. Providing a means of communicating risk implications using plausible scenarios that can be easily explained to a non-technical audience

III. Guarding against major errors in the form of model risk

IV. Complying with the requirements of Basel II.

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101. Which of the following would not be a part of the principal component structure of the term structure of futures prices?

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102. Loss provisioning is intended to cover:

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103. For a security with a daily standard deviation of 2%, calculate the 10-day VaR at the 95% confidence level. Assume expected daily returns to be nil.

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104. If and are the expected rate of return and volatility of an asset whose prices are log-normally distributed, and a random drawing from a standard normal distribution, we can simulate the asset's returns using the expressions:

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105. Which of the following statements is true?

I. It is sufficient to ensure that a parent entity has sufficient excess liquidity to cover a liquidity shortfall for a subsidiary.

II. If a parent entity has a shortfall of liquidity, it can always rely upon any excess liquidity that its foreign subsidiaries might have.

III. Wholesale funding sources for a bank refer to stable sources of funding provided by the central bank.

IV. Funding diversification refers to diversification of both funding sources and funding tenors.

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106. The loss severity distribution for operational risk loss events is generally modeled by which of the following distributions:

I. the lognormal distribution

II. The gamma density function

III. Generalized hyperbolic distributions

IV. Lognormal mixtures

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107. Which of the following cannot be used as an internal credit rating model to assess an individual borrower:

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108. If the 1-day VaR of a portfolio is $25m, what is the 10-day VaR for the portfolio?

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109. Which of the following statements are true:

I. Top down approaches help focus management attention on the frequency and severity of loss events, while bottom up approaches do not.

II. Top down approaches rely upon high level data while bottom up approaches need firm specific risk data to estimate risk.

III. Scenario analysis can help capture both qualitative and quantitative dimensions of operational risk.

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110. The results of 'desk-level' stress tests cannot be added together to arrive at institution wide estimates because:

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111. Regulatory arbitrage refers to:

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112. According to the Basel II standard, which of the following conditions must be satisfied before a bank can use 'mark-to-model' for securities in its trading book?

I. Marking-to-market is not possible

II. Market inputs for the model should be sourced in line with market prices

III. The model should have been created by the front office

IV. The model should be subject to periodic review to determine the accuracy of its performance

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113. For identical mean and variance, which of the following distribution assumptions will provide a higher estimate of VaR at a high level of confidence?

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114. A stock's volatility under EWMA is estimated at 3.5% on a day its price is $10. The next day, the price moves to $11.

What is the EWMA estimate of the volatility the next day? Assume the persistence parameter = 0.93.

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115. CORRECT TEXT

A Monte Carlo simulation based VaR can be effectively used in which of the following cases:

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116. Which of the following statements are true:

I. The three pillars under Basel II are market risk, credit risk and operational risk.

II. Basel II is an improvement over Basel I by increasing the risk sensitivity of the minimum capital requirements.

III. Basel II encourages disclosure of capital levels and risks

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117. Which of the following are measures of liquidity risk

I. Liquidity Coverage Ratio

II. Net Stable Funding Ratio

III. Book Value to Share Price

IV. Earnings Per Share

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118. Which of the following is not a credit event under ISDA definitions?

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119. An equity manager holds a portfolio valued at $10m which has a beta of 1.1. He believes the market may see a dip in the coming weeks and wishes to eliminate his market exposure temporarily. Market index futures are available and the current futures notional on these is $50,000 per contract.

Which of the following represents the best strategy for the manager to hedge his risk according to his views?

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120. Which of the following best describes Altman's Z-score

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121. Which of the following are considered asset based credit enhancements?

I. Collateral

II. Credit default swaps

III. Close out netting arrangements

IV. Cash reserves

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122. When considering a request for a loan from a retail customer, which of the following factors is relevant for a bank to consider:

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123. Which of the following statements is true:

I. When averaging quantiles of two Pareto distributions, the quantiles of the averaged models are equal to the geometric average of the quantiles of the original models based upon the number of data items in each original model.

II. When modeling severity distributions, we can only use distributions which have fewer parameters than the number of datapoints we are modeling from.

III. If an internal loss data based model covers the same risks as a scenario based model, they can can be combined using the weighted average of their parameters.

IV If an internal loss model and a scenario based model address different risks, the models can be combined by taking their sums.

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124. The largest 10 losses over a 250 day observation period are as follows. Calculate the expected shortfall at a 98% confidence level:

20m

19m

19m

17m

16m

13m

11m

10m

9m

9m

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125. Which of the following describes rating transition matrices published by credit rating firms:

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126. Under the KMV Moody's approach to calculating expecting default frequencies (EDF), firms' default on obligations is likely when:

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127. If the default hazard rate for a company is 10%, and the spread on its bonds over the risk free rate is 800 bps, what is the expected recovery rate?

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128. Which of the following are considered counterparty based credit enhancements?

I. Collateral

II. Credit default swaps

III. Close out netting arrangements

IV. Guarantees

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129. The probability of default of a security over a 1 year period is 3%.

What is the probability that it would have defaulted within 6 months?

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130. Which of the following best describes economic capital?

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131. Which of the following will be a loss not covered by operational risk as defined under Basel II?

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132. In respect of operational risk capital calculations, the Basel II accord recommends a confidence level and time horizon of:

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133. Which of the following statements are true:

I. Stress testing, if exhaustive, can replace traditional risk management tools such as value-at-risk (VaR)

II. Stress tests can be particularly useful in identifying risks with new products

III. Stress testing is distinct from a bank's ICAAP carried out periodically

IV. Stress testing is a powerful communication tool that can convey risks to decisionmakers in an organization

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134. CORRECT TEXT

The standard error of a Monte Carlo simulation is:

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135. Which of the following is not a consideration in determining the liquidity needs of a firm (as opposed to determining the time horizon for liquidity risk)?

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136. Changes in which of the following do not affect the expected default frequencies (EDF) under the KMV Moody's approach to credit risk?

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137. Which of the following is NOT an approach used to allocate economic capital to underlying business units:

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138. Which of the following is closest to the description of a 'risk functional'?

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139. The Basel framework does not permit which of the following Units of Measure (UoM) for operational risk modeling:

I. UoM based on legal entity

II. UoM based on event type

III. UoM based on geography

IV. UoM based on line of business

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140. Which of the following is not an approach proposed by the Basel II framework to compute

operational risk capital?

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141. Which of the following steps are required for computing the aggregate distribution for a UoM for operational risk once loss frequency and severity curves have been estimated:

I. Simulate number of losses based on the frequency distribution

II. Simulate the dollar value of the losses from the severity distribution

III. Simulate random number from the copula used to model dependence between the UoMs

IV. Compute dependent losses from aggregate distribution curves

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142. Which of the following are valid approaches to leveraging external loss data for modeling operational risks:

I. Both internal and external losses can be fitted with distributions, and a weighted average approach using these distributions is relied upon for capital calculations.

II. External loss data is used to inform scenario modeling.

III. External loss data is combined with internal loss data points, and distributions fitted to the combined data set.

IV. External loss data is used to replace internal loss data points to create a higher quality data set to fit distributions.

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143. If the duration of a bond yielding 10% is 6 years, the volatility of the underlying interest rates 5% per annum, what is the 10-day VaR at 99% confidence of a bond position comprising just this bond with a value of $10m? Assume there are 250 days in a year.

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144. Which of the following is a valid approach to determining the magnitude of a shock for a given risk factor as part of a historical stress testing exercise?

I. Determine the maximum peak-to-trough change in the risk factor over the defined period of the historical event

II. Determine the minimum peak-to-trough change in the risk factor over the defined period of the historical event

III. Determine the total change in the risk factor between the start date and the finish date of the event regardless of peaks and troughs in between

IV. Determine the maximum single day change in the risk factor and multiply by the number of days covered by the stress event

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