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PRMIA 8007 Exam Syllabus Topics:

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

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

                              1. The natural logarithm of x is:

                              A) always greater than x, for x>0
                              B) log(e)
                              C) the inverse function of exp(x)
                              D) 46


                              2. The correlation between two asset returns is 0.5. What is the largest eigenvalue of their correlation matrix?

                              A) 1
                              B) None of the above
                              C) 0.5
                              D) 1.5


                              3. What is the maximum value for f(x)= 8-(x+3)(x-3)?

                              A) 8
                              B) 17
                              C) None of these
                              D) -1


                              4. If A and B are two events with P(A) = 1/4, P(B) = 1/3 and P(A intersection B) =1/5, what is P(Bc | Ac) i.e. the probability of the complement of B when the complement of A is given?

                              A) 37/45
                              B) 3/4
                              C) None of these
                              D) 12/29


                              5. Which of the following statements about skewness of an empirical probability distribution are correct?
                              1. When sampling returns from a time series of asset prices, discretely compounded returns exhibit higher skewness than continuously compounded returns
                              2. When the mean is significantly less than the median, this is an indication of negative skewness
                              3. Skewness is a sign of asymmetry in the dispersion of the data

                              A) Statements 1 and 3 are correct
                              B) Statements 1 and 2 are correct
                              C) Statements 2 and 3 are correct
                              D) All three statements are correct


                              Solutions:

                              Question # 1
                              Answer: C
                              Question # 2
                              Answer: D
                              Question # 3
                              Answer: B
                              Question # 4
                              Answer: A
                              Question # 5
                              Answer: D

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