PRMIA Exam 8010 Topic 1 Question 57 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 57
Topic #: 1

Which of the following formulae correctly describes Component VaR. (p refers to the portfolio, and i is the i-th constituent of the portfolio. MVaR means Marginal VaR, and other symbols have their usual meanings.)

D1 and 2

Show Suggested Answer

Suggested Answer: D

The first two formulae describe component VaR. The last formula is the formula for Marginal VaR. Therefore I and II is the correct answer.

Component VaR is a VaR decomposition technique that allows the total VaR for a portfolio to be broken down and attributed to the components of a portfolio. The total of the component VaR for each constituent of a portfolio is equal to the VaR for the portfolio. This property is extremely useful as opposed to the standalone VaR for each constituent taken alone as it can be used for allocating trading budgets.

by Kaycee at Sep 19, 2024, 06:22 AM

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Glory

3 months ago

Wait, is this a trick question? What if the answer is actually none of the above? I'm so confused right now.

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Pilar

2 months ago

User 3: I'm not sure, maybe it's none of the above.

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Terina

2 months ago

User 2: No, I believe the correct answer is A) 3.

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Delsie

2 months ago

I think the answer is D) 1 and 2.

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Annelle

3 months ago

Haha, I bet the exam writer is trying to trick us with all these fancy symbols. I'm just going to go with my gut and say A) 3.

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Audry

3 months ago

I think the answer is C) 1. The formula looks like it's calculating the Component VaR, which is what the question is asking for.

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Melissa

2 months ago

I'm not sure, but I think A) 3 and B) 2 are not correct options for Component VaR.

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Lavera

2 months ago

I think it could also be D) 1 and 2, as both formulas seem to be related to Component VaR.

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Hannah

2 months ago

I agree, the formula in option C) 1 seems to be the correct one for Component VaR.

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Brett

3 months ago

Hmm, I'm leaning towards B) 2. The question mentions that 'p' refers to the portfolio, and the formula in option 2 seems to fit that description.

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Fatima

3 months ago

I agree with you, B) 2 seems to be the most fitting formula based on the information provided.

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Derick

3 months ago

I believe D) 1 and 2 are both needed to describe Component VaR accurately.

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Joseph

3 months ago

I think A) 3 is the correct formula for Component VaR.

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Kimbery

3 months ago

Why do you think it's option C?

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Raylene

3 months ago

I disagree, I believe it is option C.

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Gabriele

4 months ago

I'm pretty sure the correct formula is D) 1 and 2. The question clearly states that both the formulae for Component VaR and Marginal VaR are required.

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