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

8007 pass collection

Exam Code: 8007

Exam Name: Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition

Updated: Jul 28, 2026

Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

SectionObjectives
Calculus- Differential and Integral Calculus
  • 1. Multivariable Calculus
  • 2. Integration
  • 3. Differentiation
  • 4. Functions and Limits
Numerical Methods- Quantitative Techniques
  • 1. Numerical Approximation
  • 2. Monte Carlo Methods
  • 3. Simulation Techniques
  • 4. Optimization Methods
Probability Theory- Fundamental Probability Concepts
  • 1. Conditional Probability
  • 2. Random Variables
  • 3. Bayes' Theorem
  • 4. Probability Rules
Regression and Time Series Analysis- Modeling Techniques
  • 1. Time Series Forecasting
  • 2. Multivariate Regression
  • 3. Linear Regression
  • 4. Model Diagnostics
Linear Algebra- Matrix Methods
  • 1. Positive Definiteness
  • 2. Eigenvalues and Eigenvectors
  • 3. Matrix Operations
  • 4. Covariance Matrices
Statistical Analysis- Descriptive and Inferential Statistics
  • 1. Confidence Intervals
  • 2. Maximum Likelihood Estimation
  • 3. Moments and Distributions
  • 4. Hypothesis Testing
Risk Measurement Applications- Quantitative Risk Analysis
  • 1. Sensitivity Analysis
  • 2. Portfolio Risk Measurement
  • 3. Value at Risk Methodologies
  • 4. Volatility Modeling

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

1. Let X be a random variable distributed normally with mean 0 and standard deviation 1. What is the expected value of exp(X)?

A) E(exp(X)) = 0.6065
B) E(exp(X)) = 1
C) E(exp(X)) = 1.6487
D) E(exp(X)) = 2.7183


2. Over four consecutive years fund X returns 1%, 5%, -3%, 8%. What is the average growth rate of fund X over this period?

A) 2.75%
B) 2.49%
C) None of the above
D) 2.67%


3. In statistical hypothesis tests, 'Type I error' refers to the situation in which...

A) Both null hypothesis and alternative hypothesis are accepted
B) The null hypothesis is accepted when in fact it should have been rejected
C) Both null hypothesis and alternative hypothesis are rejected
D) The null hypothesis is rejected when in fact it should have been accepted


4. An underlying asset price is at 100, its annual volatility is 25% and the risk free interest rate is 5%. A European call option has a strike of 85 and a maturity of 40 days. Its Black-Scholes price is 15.52. The options sensitivities are: delta = 0.98; gamma = 0.006 and vega = 1.55. What is the delta-gamma-vega approximation to the new option price when the underlying asset price changes to 105 and the volatility changes to 28%?

A) 20.54
B) 17.33
C) 19.23
D) 18.75


5. Which of the following can induce a 'multicollinearity' problem in a regression model?

A) A large negative correlation between the dependent variable and one of the explanatory variables
B) A high positive correlation between the dependent variable and one of the explanatory variables
C) The omission of a relevant explanatory variable
D) A high positive correlation between two explanatory variables


Solutions:

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

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