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PRMIA Exam 8010 Topic 1 Question 43 Discussion

Actual exam question for PRMIA's 8010 exam
Question #: 43
Topic #: 1
[All 8010 Questions]

Which of the following statements are true:

1. Credit VaR often assumes a one year time horizon, as opposed to a shorter time horizon for market risk as credit activities generally span a longer time period.

2. Credit losses in the banking book should be assessed on the basis of mark-to-market mode as opposed to the default-only mode.

3. The confidence level used in the calculation of credit capital is high when the objective is to maintain a high credit rating for the institution.

4. Credit capital calculations for securities with liquid markets and held for proprietary positions should be based on marking positions to market.

Show Suggested Answer Hide Answer
Suggested Answer: C

For EVT, we use the block maxima or the peaks-over-threshold methods. These provide us the data points that can be fitted to a GEV distribution.

Least squares and maximum likelihood are methods that are used for curve fitting, and they have a variety of applications across risk management.


by Britt at Mar 20, 2024, 09:09 AM

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Ivory
21 days ago
Wait, so we're talking about credit risk, not credit cards, right? I was just about to pull out my wallet and start doing some 'market risk' calculations of my own!
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Vallie
25 days ago
Hmm, this question is really testing my knowledge of credit risk. I'm going to have to consult my textbooks and notes before attempting to answer this one. Maybe I should ask the bank teller for a quick refresher while I'm at it!
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Juan
16 days ago
User 1: This question is really testing my knowledge of credit risk.
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Tula
1 months ago
This is a tricky one! I'm not too familiar with the nuances of credit risk assessment, but the mention of 'mark-to-market' in statements 2 and 4 has me scratching my head. Guess I need to brush up on my banking lingo.
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Tricia
22 days ago
User 1: I think the correct statements are 1 and 3.
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Eloisa
1 months ago
I think option B is the correct answer. Statements 1, 3, and 4 all seem plausible based on my understanding of credit risk management.
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Michell
12 hours ago
I agree, statements 1, 3, and 4 make sense to me.
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Virgilio
1 days ago
I think option B is the correct answer.
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Carma
2 months ago
Statement 1 seems to make sense, as credit activities generally have a longer time horizon than market risk. However, I'm not sure about the other statements - I'll have to look into the details of credit risk assessment and capital calculations.
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Rory
16 days ago
User 2: I agree, but we should also consider statement 3 for maintaining a high credit rating.
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Caitlin
20 days ago
User 1: I think statement 1 is true because credit activities do span a longer time period.
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Nguyet
2 months ago
I'm not sure about the answer, but I think it's important to understand the rationale behind each statement to make an informed decision.
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Maddie
2 months ago
I agree with Jaclyn, because Credit VaR does often assume a one year time horizon and a high confidence level is used for maintaining a high credit rating.
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Jaclyn
2 months ago
I think the correct answer is A) 1 and 3.
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