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PRMIA Exam 8010 Topic 11 Question 66 Discussion

Actual exam question for PRMIA's 8010 exam
Question #: 66
Topic #: 11
[All 8010 Questions]

Which of the following is not a measure of risk sensitivity of some kind?

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Suggested Answer: B

Volatility clustering leads to levels of current volatility that can be significantly different from long run averages. When volatility is running high, institutions need to shed risk, and when it is running low, they can afford to increase returns by taking on more risk for a given amount of capital. An institution's response to changes in volatility can be either to adjust risk, or capital, or both. Accounting for volatility clustering helps institutions manage their risk and capital and therefore statements I and II are correct.

Regulatory requirements do not require volatility clustering to be taken into account (at least not yet). Therefore statement III is not correct, and neither is IV which is completely unrelated to volatility clustering.


by Joanna at Jan 22, 2025, 09:07 PM

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Giovanna
25 days ago
Volatility clustering is the financial version of a roller coaster ride. Option C is the way to go - hold on tight and try not to hurl!
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Leontine
26 days ago
Ah, the joys of finance. Volatility clustering, capital requirements, regulatory hoops - it's a party, I tell ya! I'm going with option C. Covers all the fun stuff.
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Inocencia
2 days ago
User 2: Yeah, I think so too. It's important for financial institutions to consider all those factors.
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Rossana
3 days ago
User 1: I agree, option C seems like the best choice to cover all the bases.
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Leigha
1 months ago
I'm a bit puzzled why option 4 is even there. Mean reversion? Who cares about that when you've got volatility to deal with. Options 1, 2, and 3 are the real deal.
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Tyisha
15 days ago
True, but options 1, 2, and 3 are crucial for managing risk and meeting regulatory requirements.
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Martina
22 days ago
Option 4 is important because mean reversion helps predict future returns.
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Celestina
1 months ago
Definitely gotta account for those wild swings in the market. Option C covers all the bases - regulatory, capital, and risk management. It's the way to go.
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Kerry
1 months ago
Volatility clustering is a real concern for financial institutions. I'd say options 2, 3, and 4 are key to managing that risk effectively.
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Glennis
8 days ago
Regulatory requirements play a big role in how financial institutions handle risk.
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Nickie
23 days ago
I agree, having the right level of capital is crucial for managing volatility clustering.
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Jodi
2 months ago
Definitely, those options cover all the important reasons for considering volatility clustering.
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Kathrine
2 months ago
So, the answer options A) 2, 3 and 4 seem to make sense.
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Jess
2 months ago
I agree, they also need to know the right level of capital to hold.
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Jodi
2 months ago
Yes, it's important for them to avoid taking on too much risk.
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Kathrine
2 months ago
I think financial institutions should consider volatility clustering.
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