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 10, 2026
  • Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

SectionWeightObjectives
Topic 1: Probability Theory25%- Random variables and distributions
  • 1. Expected value, variance, covariance
    • 2. Discrete and continuous distributions
      - Basic probability concepts
      • 1. Axioms and rules
        • 2. Conditional probability and independence
          Topic 2: Calculus and Functions20%- Multivariable calculus
          • 1. Partial derivatives
            • 2. Optimization
              - Single-variable calculus
              • 1. Integrals and applications
                • 2. Limits and continuity
                  • 3. Derivatives and applications
                    Topic 3: Linear Algebra and Matrix Theory20%- Vectors and eigenvalues
                    • 1. Eigenvalues and eigenvectors
                      • 2. Diagonalization
                        - Matrix operations
                        • 1. Addition, multiplication, inversion
                          • 2. Determinants and trace
                            Topic 4: Statistics and Regression Analysis20%- Linear regression
                            • 1. Hypothesis testing and confidence intervals
                              • 2. Simple and multiple regression
                                - Descriptive statistics
                                • 1. Correlation and covariance
                                  • 2. Measures of location and dispersion
                                    Topic 5: Numerical Methods & Financial Mathematics15%- Root finding and approximation
                                    - Time value of money
                                    - Basics of risk modeling

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

                                    Question #1

                                    What can be said about observations of random variables that are i.i.d. a normally distributed?

                                    • A. The estimated mean divided by the estimated variance has a Chi2-distribution
                                    • B. The estimated mean divided by the estimated standard deviation has a t-distribution
                                    • C. The estimated mean divided by the estimated standard deviation has a Chi2-distribution
                                    • D. The estimated mean divided by the estimated variance has a t-distribution
                                    Answer: B
                                    Question #2

                                    An option has value 10 when the underlying price is 99 and value 9.5 when the underlying price is 101.
                                    Approximate the value of the option delta using a first order central finite difference.

                                    • A. 0.25
                                    • B. -4
                                    • C. -0.5
                                    • D. -0.25
                                    Answer: D
                                    Question #3

                                    The bisection method can be used for solving f(x)=0 for a unique solution of x, when

                                    • A. The function f(x) is continuous and monotonic
                                    • B. The function f(x) is differentiable
                                    • C. The function f(x) is differentiable and we have an explicit expression for the derivative
                                    • D. The function f(x) is continuous
                                    Answer: A
                                    Question #4

                                    Simple linear regression involves one dependent variable, one independent variable and one error variable. In contrast, multiple linear regression uses...

                                    • A. One dependent variable, many independent variables, one error variable
                                    • B. Many dependent variables, one independent variable, one error variable
                                    • C. Many dependent variables, many independent variables, many error variables
                                    • D. One dependent variable, one independent variable, many error variables
                                    Answer: A
                                    Question #5

                                    What is a Hessian?

                                    • A. The vector of partial derivatives of a contingent claim
                                    • B. The point at which a minimum of a multidimensional function is achieved
                                    • C. A matrix of second derivatives of a function
                                    • D. Correlation matrix of market indices
                                    Answer: C

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