PRMIA Exam 8010 Topic 5 Question 62 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 62
Topic #: 5

[All 8010 Questions]

Under the CreditPortfolio View approach to credit risk modeling, which of the following best describes the conditional transition matrix:

AThe conditional transition matrix is the unconditional transition matrix adjusted for the state of the economy and other macro economic factors being modeled

BThe conditional transition matrix is the transition matrix adjusted for the risk horizon being different from that of the transition matrix

CThe conditional transition matrix is the unconditional transition matrix adjusted for probabilities of defaults

DThe conditional transition matrix is the transition matrix adjusted for the distribution of the firms' asset returns

Show Suggested Answer

Suggested Answer: C

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.

by Farrah at Oct 22, 2024, 12:23 PM

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Chu

10 days ago

Hmm, I'm not too sure about this one. I was thinking the answer might be B, but now I'm second-guessing myself. Guess I need to study my credit risk modeling a bit more.

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Antonio

17 days ago

Hmm, that's an interesting perspective. I can see how that could also be a valid interpretation.

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I think the correct answer is D. The conditional transition matrix is the transition matrix adjusted for the distribution of the firms' asset returns. This makes sense because credit risk is closely tied to the value of the firm's assets.

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Margarita

3 days ago

I think the correct answer is D. The conditional transition matrix is the transition matrix adjusted for the distribution of the firms' asset returns.

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Ruthann

22 days ago

I disagree, I believe it is adjusted for the distribution of the firms' asset returns.

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Antonio

23 days ago

I think the conditional transition matrix is the unconditional transition matrix adjusted for the state of the economy.

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PRMIA Exam 8010 Topic 5 Question 62 Discussion

Contribute your Thoughts:

Chu

Antonio

Yuette

Margarita

Ruthann

Antonio