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: Sep 08, 2026

Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

SectionObjectives
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
          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
                  Risk Measurement Techniques- Value at Risk (VaR)
                  • 1. Historical simulation approach
                    • 2. Parametric and non-parametric VaR
                      - Volatility and correlation
                      • 1. Correlation estimation techniques
                        • 2. Variance-covariance methods
                          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:

                              Question #1

                              Calculate the determinant of the following matrix:

                              • A. 4.25
                              • B. -4.25
                              • C. 2
                              • D. 4
                              Answer: C
                              Question #2

                              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. None of the above
                              • B. There will always be a downward drift in the lattice
                              • C. The lattice will not recombine
                              • D. The probability of an up move will not be constant
                              Answer: A
                              Question #3

                              Newton-Raphson iteration is used to find a solution of x5 - x3 + x = 1. If xn = 2, what is xn+1?

                              • A. 1.623
                              • B. 2.362
                              • C. 0.377
                              • D. 1.638
                              Answer: D
                              Question #4

                              Two vectors are orthogonal when:

                              • A. their scalar product (sum product) is zero
                              • B. their components are linearly dependent
                              • C. their determinant is zero
                              • D. one is a scalar multiple of the other
                              Answer: A
                              Question #5

                              Let f(x) = c for x in [0,4] and 0 for other values of x.
                              What is the value of the constant c that makes f(x) a probability density function; and what if f(x) = cx for x in
                              [0,4]?

                              • A. 1/7 and 1/9
                              • B. 1/4 and 1/7
                              • C. 1/4 and 1/6
                              • D. None of the above
                              Answer: D

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