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PRMIA Exam 8010 Topic 1 Question 37 Discussion

Actual exam question for PRMIA's 8010 exam
Question #: 37
Topic #: 1
[All 8010 Questions]

Which of the following statements are correct:

1. A training set is a set of data used to create a model, while a control set is a set of data is used to prove that the model actually works

2. Cleansing, aggregating or ensuring data integrity is a task for the IT department, and is not a risk manager's responsibility

3. Lack of information on the quality of underlying securities and assets was a major cause of the collapse in the CDO markets during the credit crisis that started in 2007

4. The problem of lack of historical data can be addressed reasonably satisfactorily by using analytical approaches

Show Suggested Answer Hide Answer
Suggested Answer: B

Volatility clustering leads to levels of current volatility that can be significantly different from long run averages. When volatility is running high, institutions need to shed risk, and when it is running low, they can afford to increase returns by taking on more risk for a given amount of capital. An institution's response to changes in volatility can be either to adjust risk, or capital, or both. Accounting for volatility clustering helps institutions manage their risk and capital and therefore statements I and II are correct.

Regulatory requirements do not require volatility clustering to be taken into account (at least not yet). Therefore statement III is not correct, and neither is IV which is completely unrelated to volatility clustering.


Contribute your Thoughts:

Pamella
1 months ago
Ah, the old 'let's confuse the candidates with trick questions' approach. Classic.
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Johana
4 days ago
B) 1, 3 and 4
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Douglass
15 days ago
A) 2 and 4
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Jenelle
1 months ago
Haha, the IT department handling data quality? Clearly the exam writer has never met an IT guy. I'm going with C on this one.
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Meaghan
23 hours ago
I'm going with option C as well.
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Floyd
8 days ago
Yeah, I think the correct statements are 1 and 3.
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Santos
16 days ago
I agree, IT departments are not always the best at handling data quality.
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Timothy
2 months ago
This is a tough one. I think 1 and 3 are right, but 2 and 4 seem a bit sketchy. Maybe I should consult the crystal ball for this one.
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Mayra
17 days ago
Let's go with option C) 1 and 3.
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Peggie
1 months ago
Maybe consulting the crystal ball wouldn't hurt.
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Jules
2 months ago
I agree, 2 and 4 do seem a bit sketchy.
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Belen
2 months ago
I think 1 and 3 are correct.
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Fatima
2 months ago
Hmm, I'm not sure about 2 and 4. Doesn't the risk manager have a role in data quality and integrity? And historical data can be tricky to work with.
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Dante
23 days ago
Gearldine: Definitely, but analytical approaches can help address that.
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Gearldine
24 days ago
Ruby: Historical data can be tricky to work with, though.
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Ruby
25 days ago
User 2: Yeah, I agree. It's important for them to ensure data integrity.
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Carma
29 days ago
User 1: I think the risk manager does have a role in data quality.
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Gerry
1 months ago
User 2
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Colton
1 months ago
User 1
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Georgeanna
2 months ago
Statement 1 is correct, but the rest seem a bit off to me. I'll have to think this one through.
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Anglea
2 months ago
Well, let's discuss our rationale. Why do you think 2 and 4 are correct?
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Elena
2 months ago
I disagree, I believe it's 2 and 4.
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Anglea
2 months ago
I think the correct statements are 1 and 3.
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