10 exam-style questions with answers and explanations, straight from our 1,030-question bank. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
The PRM exam has 144 questions and runs 8 hours.
These 10 free PRM questions are organized by exam domain, so you can see how each part of the Professional Risk Manager blueprint is tested. Reveal the answer and explanation under each question.
"The market returned 14%, and you returned only 12%," a client tells an equity manager. For the same period, the portfolio's beta was 0.50 and the risk-free return was 2%. Which assessment follows from Jensen's alpha?
Correct answer: C - +4 percentage points: the manager exceeded the CAPM-adjusted benchmark.
An equity-options desk is short 200 European call contracts, each covering 100 shares. It holds 8,000 shares of the underlying stock as a delta hedge. After the stock rallies, the per-share call delta rises from 0.40 to 0.55; the number of contracts is unchanged. How must the stock position be adjusted to restore delta neutrality?
Correct answer: D - Buy 3,000 shares.
A dealer has a large USD/EUR trade with a small positive mark-to-market value. Its dollar payment becomes irrevocable several hours before the euro receipt is final. The settlement committee wants to remove the resulting principal exposure, rather than merely reduce processing errors. Which change meets that objective?
Correct answer: D - Use payment-versus-payment settlement, linking final delivery of the two currencies.
To validate a model used at loan origination, a team trains on loans originated through 2022 and tests on 2023 originations. Outcomes are measured over the following 12 months. For both groups, it joins each borrower to the most recent credit-bureau record available in 2025. The holdout ROC AUC is 0.94. Before this result can support deployment, what must change?
Correct answer: B - Rebuild the predictors using information available at each loan's origination date.
A payments-service recovery exercise restores valid new-payment processing after 1.5 hours, but recovers records only up to 25 minutes before the disruption. The approved recovery time objective (RTO) is two hours, the recovery point objective (RPO) is ten minutes, and the time-based impact tolerance is four hours. The exercise report should record:
Correct answer: C - RTO met; RPO missed; the time-based impact tolerance met.
A manufacturer writes an uncollateralized put on its own shares to a bank. If the share price collapses, the bank's claim under the put grows just as the manufacturer's ability to pay deteriorates. A valuation model estimates exposure and credit risk separately, assuming independence. What is the central weakness in that assumption?
Correct answer: A - The model can understate credit loss because of specific wrong-way risk.
During the renewal of a $12 million revolving facility, $6 million is drawn. For the coming year, the credit model assigns a 50% conversion factor to the undrawn commitment, a PD of 2%, and an LGD of 40%. A proposed annual charge of $60,000 is intended to cover expected credit loss only. How does that charge compare with the modeled loss?
Correct answer: B - It is insufficient; the expected loss is $72,000.
Two portfolios have continuous modeled one-day loss distributions. Each has a 99% VaR of $4 million. At the same confidence level, expected shortfall is $5 million for Portfolio A and $13 million for Portfolio B. A limit committee argues that their tail risks are equivalent because their VaR is identical. What does the expected-shortfall comparison establish?
Correct answer: B - Portfolio B has larger average losses in the worst 1% of modeled outcomes.
A trader proposes doubling a long position in two-year government bonds and an offsetting short position in ten-year government bonds. Aggregate DV01 would remain zero, despite large opposing maturity-bucket sensitivities. Both legs are option-free and in the same currency. To constrain the additional yield-curve exposure, the limit framework needs:
Correct answer: A - Limits on key-rate DV01 at individual curve maturities.
Drawing on Silicon Valley Bank's experience, a bank reviews its stress tests for long-dated fixed-rate government securities funded largely by uninsured deposits from one business sector. Its rate-shock test holds deposits constant; its withdrawal test assumes securities can be sold at amortized cost. Which redesign most directly captures the interaction these tests miss?
Correct answer: A - Combine rate-driven asset losses, correlated withdrawals, and executable forced-sale prices in one scenario.
The PRM exam also covers these domains. Drill them in the full free practice test:
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