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

  • Exam Code: 8007
  • Exam Name: Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition
  • Updated: Aug 07, 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: 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 3: Risk Measurement Techniques- Volatility and correlation
                  • 1. Correlation estimation techniques
                    • 2. Variance-covariance methods
                      - Value at Risk (VaR)
                      • 1. Parametric and non-parametric VaR
                        • 2. Historical simulation approach
                          Topic 4: 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. In a quadratic Taylor approximation, a function is approximated by:

                              A) a straight line
                              B) a cubic polynomial
                              C) a constant
                              D) a parabola


                              2. Bond convexity is closely related to ...

                              A) The derivative of the bond's present value with respect to yield
                              B) The integral of the bond's present value with respect to yield
                              C) The sensitivity of the bond's present value with respect to yield
                              D) The second derivative of the bond's present value with respect to yield


                              3. For a quadratic equation, which of the following is FALSE?

                              A) If the discriminant is positive there are two different real solutions
                              B) If the discriminant is negative, there are no real solutions
                              C) If the discriminant is negative there are two different real solutions
                              D) If the discriminant is zero, there is only one solution


                              4. Suppose a discrete random variable can take on the values -1, 0 and 1 each with a probability of 1/3. Then the mean and variance of the variable is

                              A) mean is 0, variance is 1/3
                              B) mean is 1/3, variance is 1/3
                              C) mean is 0, variance is 1/2
                              D) mean is 0, variance is 2/3


                              5. For each of the following functions, indicate whether its graph is concave or convex:
                              Y = 7x2 + 3x + 9
                              Y = 6 ln(3x)
                              Y = exp(-4x)

                              A) concave, concave, concave
                              B) convex, convex, concave
                              C) concave, convex, convex
                              D) convex, concave, concave


                              Solutions:

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

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