PRMIA Exam 8004 Topic 1 Question 19 Discussion

Actual exam question for PRMIA's 8004 exam

Question #: 19
Topic #: 1

[All 8004 Questions]

According to the Group of 30 Report, option contracts:

AAlways generate credit risk to both counterparties

BCreate credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation

CCreate no credit risk, since the buyer need not exercise the option

DUsually create credit risk only for the seller (to default by the buyer)

Show Suggested Answer

Suggested Answer: D

by Lizette at Mar 18, 2024, 12:14 PM

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Christa

9 months ago

I see where you're coming from, but I still think C) All of the above is the most comprehensive choice

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Lauran

9 months ago

I feel like maybe D) I and II only could also be correct, as those are key considerations for compensation plans

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Leslee

10 months ago

I agree, because all the options seem relevant for the Board of Directors to consider

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Loreta

10 months ago

I think the answer is C) All of the above

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Malcom

10 months ago

I believe so, that's why I would choose B) I, II and IV only

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Hershel

11 months ago

But aren't competitive market conditions and compliance with corporate risk appetite the most crucial aspects?

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Winfred

11 months ago

I agree, because all those points are important for the Board to consider

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Tom

11 months ago

I think the answer is C) All of the above

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