PRMIA 8010 Exam - Topic 1 Question 57 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 57
Topic #: 1

[All 8010 Questions]

Which of the following formulae correctly describes Component VaR. (p refers to the portfolio, and i is the i-th constituent of the portfolio. MVaR means Marginal VaR, and other symbols have their usual meanings.)

D1 and 2

Show Suggested Answer

Suggested Answer: D

The first two formulae describe component VaR. The last formula is the formula for Marginal VaR. Therefore I and II is the correct answer.

Component VaR is a VaR decomposition technique that allows the total VaR for a portfolio to be broken down and attributed to the components of a portfolio. The total of the component VaR for each constituent of a portfolio is equal to the VaR for the portfolio. This property is extremely useful as opposed to the standalone VaR for each constituent taken alone as it can be used for allocating trading budgets.

by Kaycee at Sep 19, 2024, 06:22 AM

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Lashawnda

3 months ago

Just to clarify, MVaR is crucial for this, right?

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Gerald

3 months ago

Formula 3 seems off to me, not sure why it's even an option.

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Catherin

3 months ago

Wait, isn't it a combination of both 1 and 2?

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Rex

4 months ago

I disagree, I think it's actually formula 1.

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Merilyn

4 months ago

I'm pretty sure Component VaR is described by formula 2.

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Norah

4 months ago

I think I saw a question like this in our review session, and I’m leaning towards option B, but I could be mixing it up with another concept.

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Malinda

4 months ago

I feel like option D might be correct since it includes both formulas, but I’m not entirely confident.

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Leslie

4 months ago

I remember practicing a similar question where we had to calculate Marginal VaR, but I can't recall the exact formula for Component VaR.

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Clorinda

5 months ago

I think Component VaR is related to how each asset contributes to the overall portfolio risk, but I'm not sure which formula it is.

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Lashonda

5 months ago

This seems straightforward enough. I'm pretty sure I know the right formula, but I'll double-check my understanding just to be sure before submitting my answer.

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Luke

5 months ago

Okay, I think I've got a handle on this. The key is to identify which formula captures the Marginal VaR contribution of each constituent to the overall portfolio VaR. I'll carefully evaluate each option.

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Truman

5 months ago

Hmm, I'm a bit confused by the different variables and symbols used in these formulas. I'll need to make sure I understand the meaning of each term before I can confidently select the right answer.

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Isaiah

5 months ago

This looks like a tricky question on portfolio risk measures. I'll need to carefully review the formulas and think through the definitions to determine which one correctly describes Component VaR.

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Glory

1 year ago

Wait, is this a trick question? What if the answer is actually none of the above? I'm so confused right now.

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Pilar

1 year ago

User 3: I'm not sure, maybe it's none of the above.

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Terina

1 year ago

User 2: No, I believe the correct answer is A) 3.

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Delsie

1 year ago

I think the answer is D) 1 and 2.

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Annelle

1 year ago

Haha, I bet the exam writer is trying to trick us with all these fancy symbols. I'm just going to go with my gut and say A) 3.

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Audry

1 year ago

I think the answer is C) 1. The formula looks like it's calculating the Component VaR, which is what the question is asking for.

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Melissa

1 year ago

I'm not sure, but I think A) 3 and B) 2 are not correct options for Component VaR.

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Lavera

1 year ago

I think it could also be D) 1 and 2, as both formulas seem to be related to Component VaR.

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Hannah

1 year ago

I agree, the formula in option C) 1 seems to be the correct one for Component VaR.

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Brett

1 year ago

Hmm, I'm leaning towards B) 2. The question mentions that 'p' refers to the portfolio, and the formula in option 2 seems to fit that description.

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Fatima

1 year ago

I agree with you, B) 2 seems to be the most fitting formula based on the information provided.

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Derick

1 year ago

I believe D) 1 and 2 are both needed to describe Component VaR accurately.

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Joseph

1 year ago

I think A) 3 is the correct formula for Component VaR.

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Kimbery

1 year ago

Why do you think it's option C?

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Raylene

1 year ago

I disagree, I believe it is option C.

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Gabriele

1 year ago

I'm pretty sure the correct formula is D) 1 and 2. The question clearly states that both the formulae for Component VaR and Marginal VaR are required.

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