100+ Free PRMIA CCRM Practice Questions

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Which formula correctly defines Expected Loss (EL) under the standard credit risk framework used by PRMIA and Basel?

EL = PD + LGD + EAD

EL = PD x LGD x EAD

EL = PD x (1 - LGD) x EAD

EL = EAD x (1 + LGD) / PD

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Key Facts: PRMIA CCRM Exam

65 Qs

Exam Questions

2-hour CBT exam

60%

Passing Score

PRMIA

$450-$550

Exam Fee

Member / non-member, PRMIA

100

Free Practice Questions

OpenExamPrep CCRM bank

XVAs Covered

CVA, DVA, FVA, KVA, MVA

Global

Recognition

PRMIA worldwide chapters

The PRMIA CCRM Certificate is a focused, exam-only credential covering credit and counterparty risk management. The 2-hour, ~65-question exam tests PD, LGD, EAD, EL/UL, CVA/DVA/FVA/KVA/MVA XVAs, PFE/EPE/EEPE, ISDA Master and CSA mechanics, CDS and CDX/iTraxx indices, structural (Merton/KMV) and reduced-form models, and Basel SA-CCR/IRB plus IFRS 9 three-stage ECL versus CECL lifetime ECL. PRMIA is a global non-profit risk-management association.

Sample PRMIA CCRM Practice Questions

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1Which formula correctly defines Expected Loss (EL) under the standard credit risk framework used by PRMIA and Basel?

A.EL = PD + LGD + EAD

B.EL = PD x LGD x EAD

C.EL = PD x (1 - LGD) x EAD

D.EL = EAD x (1 + LGD) / PD

Explanation: Expected Loss is the product of three components: Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD). PD is the probability the obligor defaults over the horizon (usually 1 year), LGD is the percentage of EAD lost if default occurs, and EAD is the expected dollar exposure when default happens. EL is what an institution should price into spreads and provision against ex ante.

2An obligor has PD = 2%, LGD = 45%, and EAD = $10,000,000. What is the one-year Expected Loss?

A.$45,000

B.$90,000

C.$200,000

D.$900,000

Explanation: EL = PD x LGD x EAD = 0.02 x 0.45 x 10,000,000 = $90,000. This is the amount the bank should set aside in provisions or price into the loan spread to cover average losses on this exposure over a one-year horizon.

3Which of the following best describes Unexpected Loss (UL) in a credit risk context?

A.The mean loss over a long horizon

B.The standard deviation (or volatility) of credit losses around the Expected Loss

C.The maximum possible loss in a 1-in-100,000 event

D.Losses caused by operational errors rather than defaults

Explanation: Unexpected Loss measures the volatility of credit losses around the Expected Loss - typically the standard deviation of the loss distribution. EL is covered by provisions/pricing, while UL is what economic capital must absorb. Together they form the basis for Basel's regulatory capital formula, where capital covers UL only (EL is provisioned separately).

4Under the Basel default definition that PRMIA references, an obligor is considered in default when which of the following is true?

A.The obligor misses any single interest payment

B.The obligor's credit spread widens by more than 100 bps

C.The obligor is more than 90 days past due on a material credit obligation, or the bank considers it unlikely to pay in full

D.The obligor's external rating is downgraded below investment grade

Explanation: Basel defines default as either (a) the obligor is past due more than 90 days on any material credit obligation, or (b) the bank considers the obligor unlikely to pay (UTP) in full without recourse to actions such as realizing security. Both an objective (90 dpd) and subjective (UTP) trigger apply. EBA guidelines clarify materiality thresholds.

5Which of the following is the most accurate definition of Loss Given Default (LGD)?

A.The probability that the obligor defaults

B.The percentage of EAD that the lender expects NOT to recover after default, net of recovery costs

C.The dollar amount lost in any default event

D.The recovery rate on senior secured debt

Explanation: LGD = 1 - Recovery Rate. It is the percentage of the EAD that is lost after default has occurred, after taking into account recoveries from collateral, guarantees, and workout proceeds, net of direct workout costs and time-value adjustments. LGD ranges from 0% (full recovery) to 100% (zero recovery).

6For an undrawn revolving credit facility, EAD is typically estimated using which approach?

A.Drawn balance only, ignoring future drawdowns

B.Drawn balance plus a Credit Conversion Factor (CCF) applied to the undrawn portion

C.Total facility limit at all times

D.Mark-to-market of the facility

Explanation: EAD = Drawn + CCF x Undrawn. The Credit Conversion Factor estimates how much of the undrawn commitment the obligor will draw down in the run-up to default. Distressed borrowers tend to draw revolvers heavily, so CCFs are typically large (40-100% under Basel SA depending on commitment type and original maturity).

7A credit migration matrix shows that the one-year probability of a Baa-rated bond being downgraded to Ba is 5%. Which statement is most accurate?

A.5% of Baa bonds default within one year

B.5% of Baa bonds end the year with a Ba rating

C.5% of Baa bonds are upgraded to A

D.5% of Baa bonds are withdrawn from the rating universe

Explanation: A transition matrix entry P(Baa -> Ba) gives the historical (or model-implied) probability that a bond starting at Baa is rated Ba at the end of the period. Default is captured as a separate absorbing state in the matrix, not the Ba state. Migration matrices are used in models like CreditMetrics to value rating-sensitive cash flows.

8Which of the following correctly orders typical seniority for LGD purposes from lowest LGD (best recovery) to highest LGD (worst recovery)?

A.Senior unsecured > Senior secured > Subordinated > Equity

B.Equity > Subordinated > Senior unsecured > Senior secured

C.Senior secured < Senior unsecured < Subordinated < Equity

D.Subordinated < Senior secured < Senior unsecured < Equity

Explanation: Senior secured debt has first claim on collateral and historically the lowest LGD (highest recovery). Senior unsecured ranks next, followed by subordinated debt; equity is residual and generally takes losses first, implying near-100% LGD on equity in default. Moody's recovery studies consistently show this ordering.

9If a portfolio has Expected Loss = $5m and Unexpected Loss = $20m, the economic capital allocation should be approximately:

A.$5m, since EL drives capital

B.$25m, the sum of EL and UL

C.A multiple of UL chosen to cover the desired confidence level (e.g., 99.9%), independent of EL

D.Zero, because EL is fully expected

Explanation: Economic capital is set to cover Unexpected Loss out to a high confidence level (commonly 99.9% in Basel). EL is funded through pricing/provisions, not capital. Capital is therefore typically computed as a multiplier on UL (e.g., a capital multiplier ~6-10x of UL, or directly via a tail loss minus EL formula).

10A bank uses a 1-year time horizon for PD. Which of the following statements about extending PD to a multi-year horizon is most accurate?

A.Multi-year PD = N x 1-year PD, where N is the number of years

B.Multi-year survival probabilities can be derived by chaining one-year transition matrices, assuming Markov-like behavior

C.PD is independent of horizon and remains constant

D.Multi-year PD = (1-year PD)^N

Explanation: Cumulative multi-period PDs are typically derived by multiplying one-period transition matrices (M^N for an N-year horizon), under a homogeneous Markov assumption. This produces cumulative default probabilities consistent with rating dynamics. Real-world matrices show non-Markov effects (rating momentum), so practitioners adjust accordingly.

About the PRMIA CCRM Exam

The PRMIA CCRM (Credit and Counterparty Risk Management) Certificate is a global, standalone professional credential covering credit risk, counterparty credit risk (CCR), XVAs, credit derivatives, structural and reduced-form models, securitization, and Basel and IFRS 9/CECL credit-capital frameworks.

Questions

65 scored questions

Time Limit

2 hours

Passing Score

60%

Exam Fee

$450 (PRMIA member) / $550 (non-member) (PRMIA (Professional Risk Managers' International Association))

PRMIA CCRM Exam Content Outline

12%

Credit Risk Fundamentals

PD, LGD, EAD, Expected Loss (EL = PD x LGD x EAD), Unexpected Loss, default definition, credit migration

15%

Credit Analysis and Rating

Financial-statement analysis, ratios, qualitative factors, internal rating systems, transition matrices, S&P/Moody's/Fitch methodologies

12%

Credit Portfolio Management and Securitization

Concentration, correlation, single-name vs portfolio risk, ABS/MBS/CDO structures, tranching, waterfalls, credit enhancement

18%

Counterparty Credit Risk

CVA, DVA, FVA, KVA, MVA (XVAs), PFE, EPE, EEPE, netting, ISDA Master Agreement, CSA collateral, SA-CCR

12%

Credit Derivatives

CDS premium and default legs, ISDA 2009 Big Bang protocols, index CDS (CDX, iTraxx), total return swaps, basket and Nth-to-default credit derivatives

15%

Credit Modeling

Structural (Merton, KMV) and reduced-form/intensity models, copula models, Credit VaR, Monte Carlo simulation, CreditMetrics

16%

Regulatory Capital and IFRS 9 / CECL

Basel III/IV credit risk: SA, IRB Foundation, IRB Advanced; risk-weight functions; IFRS 9 3-stage ECL (12-month for Stage 1, lifetime for Stages 2/3) vs CECL lifetime ECL from origination

How to Pass the PRMIA CCRM Exam

What You Need to Know

Passing score: 60%
Exam length: 65 questions
Time limit: 2 hours
Exam fee: $450 (PRMIA member) / $550 (non-member)

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

PRMIA CCRM Study Tips from Top Performers

1Memorize EL = PD x LGD x EAD and the EAD formula EAD = Drawn + CCF x Undrawn cold - they are tested constantly

2Distinguish PFE (a quantile of future exposure) from EPE (the average) and EEPE (the regulatory time-averaged running max)

3Know the XVA family in order: CVA (counterparty credit), DVA (own credit), FVA (funding), KVA (capital), MVA (initial margin)

4Learn the ISDA Master + CSA structure: Master enables close-out netting, CSA governs collateral thresholds and MTA

5Practice the Merton model: equity = call on assets, distance to default = (E[V] - D) / (sigma_V x sqrt(T)), then map DD to EDF (KMV)

6Distinguish IFRS 9 (3-stage: 12-month ECL Stage 1, lifetime Stages 2/3) from CECL (lifetime ECL from origination, no staging)

7Memorize standard CDX (125 IG names) and iTraxx (125 EU IG names) and the Big Bang (April 2009) standardization changes

Frequently Asked Questions

What is the PRMIA CCRM Certificate?

The PRMIA Credit and Counterparty Risk Management (CCRM) Certificate is a globally recognized standalone credential focused on credit and counterparty risk. It is issued by PRMIA (Professional Risk Managers' International Association). It is exam-only with no work-experience requirement and is designed for risk professionals, credit analysts, and quants seeking targeted credit-risk credentials without committing to the full PRM.

How is the CCRM exam structured?

The CCRM exam is a 2-hour computer-based exam delivered through Pearson VUE testing centers and online proctoring. It contains approximately 65 multiple-choice questions covering credit risk fundamentals, credit analysis, portfolio and securitization, counterparty credit risk and XVAs, credit derivatives, credit modeling, and regulatory/accounting credit frameworks. Candidates have 90 days to schedule once they register.

What topics does CCRM cover that are not in the standard FRM or PRM?

CCRM goes deeper into XVAs (CVA, DVA, FVA, KVA, MVA), Basel SA-CCR mechanics, ISDA Master Agreement and CSA detail, credit derivatives nuances (Big Bang protocols, indices), and the integration of IFRS 9 / CECL accounting ECL with Basel regulatory EL than a single-window risk exam typically does. It is also more focused than the broader FRM or full PRM, making it suitable for credit specialists.

How long should I study for CCRM?

Most candidates spend 80-150 hours over 6-10 weeks on CCRM preparation, depending on prior credit-risk experience. Practitioners with prior CFA, FRM, or front-office credit experience often need less time. Plan to balance qualitative reading (ISDA, Basel, IFRS 9) with quantitative practice on Merton/KMV, CVA, and Credit VaR calculations.

How does CCRM relate to the full PRM Certification?

PRMIA's full PRM Certification is a four-exam program. CCRM is one of several standalone PRMIA certificates (alongside ORM, ESG, and others) that allow professionals to earn focused credentials in specific risk domains without taking the full PRM sequence. Some candidates earn CCRM first as a stepping stone, while others take it on its own merits.

Is the CCRM exam recognized globally?

Yes. PRMIA is a global non-profit professional association headquartered in the United States with members and chapters worldwide. CCRM is recognized internationally, particularly in banks, asset managers, and consulting firms that hire credit-risk and counterparty-risk specialists. It pairs well with FRM, CFA, and CQF for risk-focused career paths.

What materials does PRMIA provide for CCRM?

PRMIA provides a CCRM handbook and recommended-reading list with credit-risk reference texts (Schonbucher, Gregory, Hull, Bluhm-Overbeck-Wagner are typical). Some candidates supplement with FRM credit-risk modules and BIS publications. Free practice questions like ours fill the gap left by limited PRMIA-issued question banks.