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PRMIA 8007 Exam Syllabus Topics:

SectionObjectives
Topic 1: Risk Measurement Techniques- Volatility and correlation
  • 1. Variance-covariance methods
    • 2. Correlation estimation techniques
      - Value at Risk (VaR)
      • 1. Historical simulation approach
        • 2. Parametric and non-parametric VaR
          Topic 2: Simulation and Numerical Methods- Monte Carlo simulation
          • 1. Risk distribution simulation
            • 2. Random number generation
              Topic 3: Probability and Statistics Foundations- Random variables and probability distributions
              • 1. Expectation, variance, and moments
                • 2. Discrete and continuous distributions
                  - Statistical inference
                  • 1. Estimation theory
                    • 2. Confidence intervals and hypothesis testing
                      Topic 4: Stochastic Processes and Time Series- Time series analysis
                      • 1. AR, MA, and ARMA models
                        • 2. Autocorrelation and stationarity
                          - Stochastic processes basics
                          • 1. Brownian motion (introductory level)
                            • 2. Markov processes

                              PRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Sample Questions:

                              Stress testing portfolios requires changing the asset volatilities and correlations to extreme values. Which of the following would lead to a non positive definite covariance matrix?

                              • A. Changing all the correlations to be zero
                              • B. Changing all the correlations to be unity
                              • C. All of the above
                              • D. Changing the volatilities to be greater than 100%
                              Reveal Solution  Discussion  0

                              Correct Answer: B  🗳️

                              The correlation between two asset returns is 1. What is the smallest eigenvalue of their correlation matrix?

                              • A. None of the above
                              • B. 0
                              • C. 1
                              • D. 0.5
                              Reveal Solution  Discussion  0

                              Correct Answer: B  🗳️

                              What is the simplest form of this expression: log2(165/2)

                              • A. 10
                              • B. 5/2 + log2(16)
                              • C. log2 (5/2) + log2(16)
                              • D. 32
                              Reveal Solution  Discussion  0

                              Correct Answer: A  🗳️

                              I have a portfolio of two stocks. The weights are 60% and 40% respectively, the volatilities are both 20%, while the correlation of returns is 50%. The volatility of my portfolio is

                              • A. 20%
                              • B. 24.4%
                              • C. 17.4%
                              • D. 16%
                              Reveal Solution  Discussion  0

                              Correct Answer: C  🗳️

                              What is the total derivative of the function f(x,y) = ln(x+y), where ln() denotes the natural logarithmic function?

                              • A. (x + y) / (x+y)
                              • B. ln(x+y) x + ln(x+y) y
                              • C. -x/(x+y) - y/(x+y)
                              • D. 1 / (x+y)
                              Reveal Solution  Discussion  0

                              Correct Answer: A  🗳️

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