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PRMIA Exam 8008 Topic 1 Question 8 Discussion
Actual exam question for
PRMIA's
8008 exam
Question #: 8
Topic #: 1
[All 8008 Questions]
Topic #: 1
When doing stress tests based on historical scenarios, if no appropriate historical scenarios exist for a security, it is most INAPPROPRIATE to:
Suggested Answer:
B
Where a historical shock factor does not exist for a security, for example because the security is new or was only thinly traded earlier, or because a particular emerging market was immature at the time of the historical scenario being considered, it is inappropriate to leave the position unshocked. By and large, the general rule to be followed when carrying out stress testing is to leave no position unshocked. Therefore Choice 'b' is the correct answer.
Choice 'd', Choice 'a' and Choice 'c' all represent valid approaches to estimating a shock factor in such cases.
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