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: Sep 01, 2026     Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

SectionObjectives
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
          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
                  Simulation and Numerical Methods- Monte Carlo simulation
                  • 1. Random number generation
                    • 2. Risk distribution simulation
                      Probability and Statistics Foundations- Random variables and probability distributions
                      • 1. Discrete and continuous distributions
                        • 2. Expectation, variance, and moments
                          - Statistical inference
                          • 1. Confidence intervals and hypothesis testing
                            • 2. Estimation theory

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

                              Question 1

                              Suppose 60% of capital is invested in asset 1, with volatility 40% and the rest is invested in asset 2, with volatility 30%. If the two asset returns have a correlation of -0.5, what is the volatility of the portfolio?

                              A. 26.33%
                              B. 36.33%
                              C. 20.78%
                              D. 36%


                              Question 2

                              What is the indefinite integral of the function f(x) = ln(x), where ln(x) denotes the natural logarithmic function?

                              A. x ln(x) - x
                              B. ln(x) - x
                              C. exp(x)
                              D. 1/x


                              Question 3

                              Which of the provided answers solves this system of equations?
                              2y - 3x = 3y +x
                              y2 + x2 = 68

                              A. x = 2; y = -8
                              B. x = -2; y = -8
                              C. x = 2; y = 8
                              D. x = 1; y = square root of 67


                              Question 4

                              What is the probability of tossing a coin and getting exactly 2 heads out of 5 throws?

                              A. 8/15
                              B. 9/23
                              C. None of these
                              D. 10/32


                              Question 5

                              Consider a binomial lattice where a security price S moves up by a factor u with probability p, or down by a factor d with probability 1 - p. If we set d > 1/u then which of the following will be TRUE?

                              A. The lattice will not recombine
                              B. There will always be a downward drift in the lattice
                              C. None of the above
                              D. The probability of an up move will not be constant


                              Solutions:

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

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