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PRMIA Exam 8010 Topic 1 Question 69 Discussion

Actual exam question for PRMIA's 8010 exam
Question #: 69
Topic #: 1
[All 8010 Questions]

For credit risk calculations, correlation between the asset values of two issuers is often proxied with:

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Suggested Answer: D

Choice 'b', Choice 'c' and Choice 'a' correctly describe a bilateral close out netting as recommended by the ISDA. However Choice 'd' is not correct as it suggests individual settlement of transactions without netting which is the whole point of bilateral close out netting.


by Anastacia at Mar 20, 2025, 08:15 PM

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Dawne
2 days ago
I feel like equity correlations could be relevant too, but I don't recall them being the primary proxy for asset value correlation.
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Erinn
8 days ago
I remember practicing a question similar to this, and I think transition probabilities were mentioned as a way to assess risk.
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Olene
13 days ago
I think the answer might be default correlations, but I'm not entirely sure. We discussed it in class, and it seemed important for credit risk.
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Lai
19 days ago
Default correlations, got it. That makes sense - the correlation between the default risks of two issuers should give a good indication of the correlation between their underlying asset values. I feel pretty good about this one.
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Cortney
24 days ago
Okay, let me see... I remember learning that credit migration matrices and transition probabilities are used for credit risk modeling, but I don't think they directly capture the correlation between asset values. I'm leaning towards default correlations as the best answer here.
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Olene
30 days ago
Hmm, I'm not totally sure about this one. I know correlation is important for credit risk, but I'm not confident which specific metric is typically used as a proxy. I'll have to think this through carefully.
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German
1 month ago
This one seems straightforward - I think the answer is default correlations, since that's a common way to proxy for the correlation between asset values.
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Lachelle
6 months ago
This is a classic case of 'the more you know, the more you realize you don't know'. I'm going with D) Default correlations, but I'm open to being corrected if I'm missing something!
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Fausto
6 months ago
Haha, if only the answer was 'E) Horoscope correlations' - that would really spice things up! But seriously, I agree that D) Default correlations is the way to go here.
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Micaela
6 months ago
I was debating between C) Equity correlations and D) Default correlations, but I ultimately went with D. Seems like the more direct approach for this kind of analysis.
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Ines
5 months ago
Default correlations are often used in credit risk calculations because they directly measure the relationship between defaults of two issuers.
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Anissa
5 months ago
I went with A) Credit migration matrices. It's another common approach to proxy correlation between asset values.
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Karma
5 months ago
I chose D) Default correlations as well. It's a common proxy for correlation in credit risk calculations.
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Avery
6 months ago
I think the correct answer is D) Default correlations. That makes the most sense for credit risk calculations.
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Sharee
5 months ago
Credit migration matrices are important for assessing credit risk as well.
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Chantell
6 months ago
Transition probabilities could also be a good proxy for correlation between asset values.
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Micah
6 months ago
I agree, default correlations are commonly used in credit risk calculations.
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Elizabeth
7 months ago
I'm not sure, but I think it could also be A) Credit migration matrices. It's important to consider the movement of credit ratings.
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Bulah
7 months ago
I agree with Deonna. Default correlations make sense for credit risk calculations.
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Deonna
7 months ago
I think the answer is D) Default correlations.
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