PRMIA 8010 Exam - Topic 4 Question 80 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 80
Topic #: 4

[All 8010 Questions]

Under the actuarial (or CreditRisk+) based modeling of defaults, what is the probability of 4 defaults in a retail portfolio where the number of expected defaults is 2?

A4%

B18%

C9%

D2%

Show Suggested Answer

Suggested Answer: C

The actuarial or CreditRisk+ model considers default as an 'end of game' event modeled by a Poisson distribution. The annual number of defaults is a stochastic variable with a mean of and standard deviation equal to .

The probability of n defaults is given by (^n e^-) /n!, and therefore in this case is equal to (=2^4 * exp(-2))/FACT(4)) = 0.0902.

Note that CreditRisk+ is the same methodology as the actuarial approach, and requires using the Poisson distribution.

by Beth at Jan 05, 2026, 05:16 AM

Limited Time Offer

25%

Off

Get Premium 8010 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Annice

3 days ago

Hmm, this is a tricky one. I'm going to have to go with B) 18% - the CreditRisk+ model tends to give higher probabilities for larger deviations.

upvoted 0 times

...

Vannessa

8 days ago

D) 2% seems too low for 4 defaults when the expected is 2. I'd go with C) 9% as the most likely answer.

upvoted 0 times

...

Fletcher

14 days ago

I think the answer is B) 18%. The actuarial model would give a higher probability for a larger deviation from the expected defaults.

upvoted 0 times

...

Jenelle

19 days ago

I feel like the answer might be around 9% based on my calculations, but I need to double-check my work on the Poisson probabilities.

upvoted 0 times

...

Carlota

24 days ago

If I remember correctly, the expected number of defaults is the mean in a Poisson model, so maybe we can use that to find the probability of 4 defaults?

upvoted 0 times

...

Gary

29 days ago

I practiced a similar question where we had to calculate the probability of a certain number of defaults, but I can't recall the exact formula we used.

upvoted 0 times

...

Charlena

1 month ago

I think I remember something about using the Poisson distribution for these types of problems, but I'm not entirely sure how to apply it here.

upvoted 0 times

...

Osvaldo

1 month ago

Ah, I remember learning about these default modeling techniques. I think I can apply the right formulas to find the probability here.

upvoted 0 times

...

Erasmo

1 month ago

This seems straightforward. If the expected defaults are 2, then the probability of 4 defaults should be one of the answer choices. I'll work it out.

upvoted 0 times

...

Lemuel

2 months ago

I'm a bit unsure about the actuarial and CreditRisk+ details. I'll need to review those concepts before attempting to solve this.

upvoted 0 times

...

Skye

2 months ago

Okay, the key here is understanding the expected defaults and then calculating the probability of 4 defaults. I think I can work through this step-by-step.

upvoted 0 times

...

Tyisha

2 months ago

Hmm, this looks like a probability question related to default modeling. I'll need to think through the actuarial approach and the CreditRisk+ assumptions.

upvoted 0 times

...