PRMIA 8010 Exam - Topic 2 Question 82 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 82
Topic #: 2

[All 8010 Questions]

The CDS quote for the bonds of Bank X is 200 bps. Assuming a recovery rate of 40%, calculate the default hazard rate priced in the CDS quote.

A0.80%

B5.00%

C3.33%

D2.00%

Show Suggested Answer

Suggested Answer: C

Hazard rate x Loss given default = CDS quote. In other words, Hazard rate x (1 - recovery rate) = CDS quote. We can therefore calculate the hazard rate for this problem as 200 bps/(1 - 40%) = 3.33%.

by Jamal at Mar 06, 2026, 09:58 PM

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