PRMIA 8010 Exam - Topic 5 Question 86 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 86
Topic #: 5

[All 8010 Questions]

The unexpected loss for a credit portfolio at a given VaR estimate is defined as:

Amax(Actual Loss - Expected Loss, 0)

BActual Loss - Expected Loss

CActual Loss - VaR

DVaR - Expected Loss

Show Suggested Answer

Suggested Answer: D

Unexpected loss for a credit portfolio refers to the excess of the VaR estimate over the average expected loss. The term 'unexpected loss' has this specific meaning in the context of credit risk, and not any other intuitive meaning. So if for a portfolio worth $100m expected losses are 4%, and the credit VaR at 99% is $12m, then unexpected losses at that VaR quintile are $8m. This is unrelated to actual realized losses versus expected losses.

Therefore Choice 'd' is the correct answer and the others are not.

Unexpected loss is used to determine the capital reserves to be maintained against a credit portfolio at a certain level of confidence.

by Dwight at May 17, 2026, 03:56 AM

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Adelaide

17 days ago

I think the unexpected loss is related to how much actual loss exceeds expected loss, so maybe it's A? But I'm not entirely sure.

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