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PRMIA 8010 Exam Questions
- Topic 1: Classic Credit Products: This section of the exam covers traditional lending instruments like loans and bonds used by banks and financial institutions.
- Topic 2: Classic Credit Life Cycle: This section covers the stages a credit product goes through, from origination to maturity or default.
- Topic 3: Classic Credit Risk Methodology: This section covers conventional approaches to assessing and quantifying the risk of borrower default.
- Topic 4: Credit Derivatives and Securitization: In this section, the topics covered include financial instruments that transfer credit risk and pool debt-based assets into tradable securities.
- Topic 5: Modern Credit Risk Modeling: This section covers advanced statistical and mathematical techniques for measuring and managing credit risk.
- Topic 6: Credit Portfolio Management: This section covers strategies for optimizing the overall risk and return of a collection of credit exposures.
- Topic 7: Basics of Counterparty Risk: This section covers fundamental concepts related to the risk of a counterparty failing to fulfill their contractual obligations.
- Topic 8: Risk Mitigation: This section covers techniques and tools used to reduce or transfer various types of financial risks.
- Topic 9: Credit Valuation Adjustment (CVA): This section covers an adjustment to the fair value of derivatives to account for counterparty credit risk.
- Topic 10: CVA-related Aspects: This section covers additional considerations and implications associated with Credit Valuation Adjustment.
- Topic 11: Managing Counterparty Risk and CVA: This section covers strategies and practices for controlling exposure to counterparty default and optimizing CVA.
Free PRMIA 8010 Exam Actual Questions
Note: Premium Questions for 8010 were last updated On Jul. 09, 2026 (see below)
Which of the following is the most accurate description of EPE (Expected Positive Exposure):
When a derivative transaction is entered into, its value generally is close to zero. Over time, as the value of the underlying changes, the transaction acquires a positive or negative value. It is not possible to predict the future value of the transaction in advance, however distributional assumptions can be made and potential exposure can be measured in multiple ways. Of all the possible future exposures, it is generally positive exposures that are relevant to credit risk because that is the only situation where the bank may lose money from a default of the counterparty.
The maximum (generally a quantile eg, the 97.5th quantile) exposure possible over the time of the transaction is the 'Potential Future Exposure', or PFE.
The average of the distribution of positive exposures at a specified date before the longest trade in the portfolio is called 'Expected Exposure', or EE.
The expected positive exposure calculated as the weighted average of the future positive Expected Exposure across a time horize is called the EPE, or the 'Expected Positive Exposure'.
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date - is the 'fair value', as defined under FAS 157.
Therefore the corect answer is that EPE is the weighted average of the future positive expected exposure across a time horizon.
A bank holds a portfolio of corporate bonds. Corporate bond spreads widen, resulting in a loss of value for the portfolio. This loss arises due to:
The difference between the yields on corporate bonds and the risk free rate is called the corporate bond spread. Widening of the spread means that corporate bonds yield more, and their yield curve shifts upwards, driving down bond prices. The increase in the spread is a consequence of the market risk from holding these interest rate instruments, which is a part of market risk. If the reduction in the value of the portfolio were to be caused by a change in the credit rating of the bonds held, it would have been a loss arising due to credit risk. Counterparty risk and liquidity risk are not relevant for this question. Therefore Choice 'c' is the correct answer.
According to the implied capital model, operational risk capital is estimated as:
Operational risk capital estimated using the implied capital model is merely the capital that is not attributable to market or credit risk. Therefore Choice 'b' is the correct answer. All other responses are incorrect.
The unexpected loss for a credit portfolio at a given VaR estimate is defined as:
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.
For credit risk calculations, correlation between the asset values of two issuers is often proxied with:
Asset returns are relevant for credit risk models where a default is related to the value of the assets of the firm falling below the default threshold. When assessing credit risk for portfolios with multiple credit assets, it becomes necessary to know the asset correlations of the different firms. Since this data is rarely available, it is very common to approximate asset correlations using equity prices. Equity correlations are used as proxies for asset correlation, therefore Choice 'c' is the correct answer.
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