PRMIA 8007 Exam : Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition

  • Exam Code: 8007
  • Exam Name: Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition
  • Updated: Sep 14, 2026
  • Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

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

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

                              Question #1

                              In a binomial tree lattice, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of . The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. The risk neutral probability for an up move is:

                              • A. 0.5290
                              • B. 0.5288
                              • C. 0.5286
                              • D. 0.5292
                              Reveal Solution  Discussion  0

                              Correct Answer: B  🗳️

                              Question #2

                              What is the sum of the first 20 terms of this sequence: 3, 5, 9, 17, 33, 65,...?

                              • A. 2 097 172
                              • B. 1 048 574
                              • C. 1 048 595
                              • D. 2 097 170
                              Reveal Solution  Discussion  0

                              Correct Answer: D  🗳️

                              Question #3

                              Suppose that f(x) and g(x,y) are functions. What is the partial derivative of f(g(x,y)) with respect to y?

                              • A. f(g(x,y)) dg/dy
                              • B. f'(g(x,y))
                              • C. f(dg/dy)
                              • D. f'(g(x,y)) dg/dy
                              Reveal Solution  Discussion  0

                              Correct Answer: D  🗳️

                              Question #4

                              Let a, b and c be real numbers. Which of the following statements is true?

                              • A. The associativity of multiplication is defined by
                              • B. The distributivity of multiplication is defined by
                              • C. The commutativity of multiplication is defined by
                              • D. The existence of negatives is defined by
                              Reveal Solution  Discussion  0

                              Correct Answer: B  🗳️

                              Question #5

                              Your stockbroker randomly recommends stocks to his clients from a tip sheet he is given each day. Today, his tip sheet has 3 common stocks and 5 preferred stocks from Asian companies and 3 common stocks and 5 preferred stocks from European companies. What is the probability that he will recommend a common stock AND/OR a European stock to you when you call and ask for one stock to buy today?

                              • A. None of these
                              • B. 7/8
                              • C. 9/16
                              • D. 11/16
                              Reveal Solution  Discussion  0

                              Correct Answer: D  🗳️

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