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PRMIA Exam 8010 Topic 1 Question 43 Discussion
Topic #: 1
Which of the following statements are true:
1. Credit VaR often assumes a one year time horizon, as opposed to a shorter time horizon for market risk as credit activities generally span a longer time period.
2. Credit losses in the banking book should be assessed on the basis of mark-to-market mode as opposed to the default-only mode.
3. The confidence level used in the calculation of credit capital is high when the objective is to maintain a high credit rating for the institution.
4. Credit capital calculations for securities with liquid markets and held for proprietary positions should be based on marking positions to market.
For EVT, we use the block maxima or the peaks-over-threshold methods. These provide us the data points that can be fitted to a GEV distribution.
Least squares and maximum likelihood are methods that are used for curve fitting, and they have a variety of applications across risk management.
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