Real PRMIA 8011 practice exam questions for easy pass!
Updated: Sep 06, 2025
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1. There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the two?
A) 25%
B) 40%
C) 100%
D) 0%
2. When modeling operational risk using separate distributions for loss frequency and loss severity, which of the following is true?
A) Loss severity and loss frequency distributions are considered as a bivariate model with positive correlation
B) Loss severity and loss frequency are modeled as conditional probabilities
C) Loss severity and loss frequency are modeled using the same units of measurement
D) Loss severity and loss frequency are considered independent
3. Which of the following statements is NOT true in relation to the recent financial crisis of 2007-08?
A) Counterparty risk was difficult to gauge as it was impossible to know who the counterparty's counterparties were
B) An intention to diversify from their core activities led all market participants to the same activities, which though appearing diversified at the bank's level, created a concentration risk at the systemic level
C) Central banks had data on the interconnections between institutions, but poor understanding and analysis meant this data was never analyzed
D) The existence of central counterparties could have limited the damage caused by the financial crisis
4. An equity manager holds a portfolio valued at $10m which has a beta of 1.1. He believes the market may see a dip in the coming weeks and wishes to eliminate his market exposure temporarily. Market index futures are available and the current futures notional on these is $50,000 per contract. Which of the following represents the best strategy for the manager to hedge his risk according to his views?
A) Buy 220 futures contracts
B) Liquidate his portfolio as soon as possible
C) Sell 220 futures contracts
D) Sell 200 futures contracts
5. For a bank using the advanced measurement approach to measuring operational risk, which of the following brings the greatest 'model risk' to its estimates:
A) Choice of an incorrect distribution for loss event frequencies
B) Choice of incorrect parameters for loss severity distributions
C) Insufficient number of simulations when building the loss distribution
D) Aggregation risk, from selecting an incorrect value of estimated correlations between different operational risk estimates
Solutions:
Question # 1 Answer: A | Question # 2 Answer: D | Question # 3 Answer: C | Question # 4 Answer: C | Question # 5 Answer: D |
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