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PRMIA 8010 Exam - Topic 5 Question 86 Discussion

The unexpected loss for a credit portfolio at a given VaR estimate is defined as:
D) VaR - Expected Loss
A) max(Actual Loss - Expected Loss, 0)
B) Actual Loss - Expected Loss
C) Actual Loss - VaR

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:

Show Suggested Answer Hide 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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Truman
10 hours ago
A is definitely the best choice. It aligns with risk management principles.
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Mozell
6 days ago
D feels off. VaR should be higher than expected loss, right?
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Caitlin
11 days ago
C is interesting, but I feel it doesn't capture the full picture.
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Beula
16 days ago
I lean towards B. Actual minus expected seems straightforward.
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Mirta
21 days ago
I think it's A. It makes sense to consider only the positive difference.
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Annett
26 days ago
I agree, A is the right choice!
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Leonida
1 month ago
Wait, is it really A? That seems a bit off.
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Rima
1 month ago
A makes the most sense to me.
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Vincenza
1 month ago
I thought it was B) Actual Loss - Expected Loss?
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Latia
2 months ago
It's definitely A) max(Actual Loss - Expected Loss, 0).
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Trinidad
2 months ago
I agree, A is the right choice!
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Roslyn
2 months ago
Wait, is it really A? That seems a bit off.
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Laurel
2 months ago
A makes the most sense to me.
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Moon
2 months ago
I thought it was B) Actual Loss - Expected Loss?
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Carman
2 months ago
It's definitely A) max(Actual Loss - Expected Loss, 0).
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Loreen
3 months ago
I feel like D is definitely not right since VaR should be higher than expected loss in most cases. But I can't recall the exact formula for unexpected loss.
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Alise
3 months ago
I’m a bit confused about the definitions here. I thought VaR was supposed to represent potential losses, so could it be C?
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Ruth
3 months ago
I remember practicing a similar question, and I think the formula involves comparing actual loss to expected loss directly, which makes me lean towards B.
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Adelaide
4 months 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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