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PRMIA 8010 Exam - 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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Gaston
6 days ago
Totally agree with 3, high confidence level is key for ratings.
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Linsey
12 days ago
I think statement 1 is spot on!
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Alex
18 days ago
I believe statement 4 is true since marking to market is standard for liquid securities, but I wonder if there are exceptions.
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Lakeesha
23 days ago
For statement 3, I feel like we talked about confidence levels being high for maintaining credit ratings, but I can't remember the specifics.
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Ailene
29 days ago
I think statement 2 is tricky; I recall something about mark-to-market being more relevant for trading books rather than the banking book.
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Delpha
1 month ago
I remember discussing how Credit VaR typically uses a one-year horizon, but I'm not entirely sure if that applies to all cases.
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Willow
1 month ago
The wording on some of these statements is a bit tricky. I'll need to read them closely to make sure I don't miss any nuances.
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Rashida
1 month ago
I'm confident I can get this right. The concepts around credit capital and marking to market are familiar to me.
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Brittani
1 month ago
Okay, let me think this through step-by-step. The key is understanding the distinctions between the different risk assessment approaches mentioned.
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Malcolm
1 month ago
Hmm, I'm a little unsure about the differences between credit VaR and market risk VaR. I'll need to review that part carefully.
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Art
1 month ago
This question seems pretty straightforward. I think I can handle it.
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Aleta
1 month ago
This one seems straightforward - the going concern assumption is about the business continuing indefinitely, so I'm pretty confident B is the right answer.
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Jesus
1 month ago
Hmm, I'm a bit confused by the syntax here. I'll need to review my notes on Spark DataFrame transformations to make sure I'm applying the right functions in the right order. Maybe I should start by breaking down the code block and understanding each piece.
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Lacey
2 months ago
This question seems a bit tricky. I'm not sure if the "unique solution" part means there could be multiple correct answers, or if there's only one right way to do it. I'll need to think through the requirements carefully and consider different approaches before selecting my answer.
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Ivory
6 months 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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Ellsworth
5 months ago
B) 1, 3 and 4
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Peggie
5 months ago
Yes, we're talking about credit risk in the banking book, not credit cards.
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Janna
5 months ago
A) 1 and 3
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Vallie
6 months 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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Alona
5 months ago
User 3: Maybe we can also ask the bank teller for a quick refresher.
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Leontine
5 months ago
User 2: Yeah, it's a tough one. I think we should review our textbooks and notes.
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Juan
6 months ago
User 1: This question is really testing my knowledge of credit risk.
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Tula
6 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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Douglass
5 months ago
User 3: Yeah, I'm not too sure about the mark-to-market mode mentioned in statements 2 and 4.
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Malcolm
5 months ago
User 2: I agree, those seem to make sense given the context.
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Tricia
6 months ago
User 1: I think the correct statements are 1 and 3.
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Eloisa
7 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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Cristy
5 months ago
Let's go with option B then, it covers the statements we are confident about.
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Nobuko
5 months ago
I'm not sure about statement 2, but 1, 3, and 4 seem accurate.
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Michell
5 months ago
I agree, statements 1, 3, and 4 make sense to me.
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Virgilio
5 months ago
I think option B is the correct answer.
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Carma
7 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
6 months ago
User 2: I agree, but we should also consider statement 3 for maintaining a high credit rating.
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Caitlin
6 months ago
User 1: I think statement 1 is true because credit activities do span a longer time period.
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Nguyet
7 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
7 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
7 months ago
I think the correct answer is A) 1 and 3.
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