Free PRMIA 8010 Practice Exam with Questions & Answers | Set: 8

Choice 'c' is the correct answer. Refer to the detailed loss event type classification under Basel II (see Annex 9 of the accord). Youshould know the exact names of all loss event types, and examples of each.

Regardless of the approach being followed by a bank (ie, whether foundation IRB or advanced IRB), it must make its own estimates for the probability of default. Banks following the foundation IRB approach may use values set by the supervisor for the other three parameters, though those following the advanced IRB approach may use their own estimates for all four inputs.(This is also the difference between advanced IRB and the foundation IRB approaches.) Therefore Choice 'a' is the correct answer.

Also note the four difference elements that go as inputs to the internal ratings based approach in the choicesprovided.