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

8007 real exams

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

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

Question #1

If a random variable X has a normal distribution with mean zero and variance 4, approximately what proportion of realizations of X should lie between -4 and +4?

  • A. 95%
  • B. 99%
  • C. 90%
  • D. 66.60%
Answer: A
Question #2

When calculating the implied volatility from an option price we use the bisection method and know initially that the volatility is somewhere between 1% and 100%. How many iterations do we need in order to determine the implied volatility with accuracy of 0.1%?

  • A. 25
  • B. 10
  • C. 5
  • D. 100
Answer: B
Question #3

Assume that 40% of all financial organizations investigated by authorities turn out to be fraudulent.
What is the probability of randomly investigating 2 different organizations and finding that neither is fraudulent; and what is the probability of finding exactly one being fraudulent?

  • A. 1/3 and 8/17
  • B. 2/5 and 1/2
  • C. 2/5 and 3/5
  • D. 9/25 and 12/25
Answer: D
Question #4

Suppose that f(x) and g(x,y) are functions. What is the partial derivative of f(g(x,y)) with respect to y?

  • A. f(g(x,y)) dg/dy
  • B. f(dg/dy)
  • C. f'(g(x,y)) dg/dy
  • D. f'(g(x,y))
Answer: C
Question #5

In a binomial tree lattice, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of . The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. The risk neutral probability for an up move is:

  • A. 0.5290
  • B. 0.5286
  • C. 0.5288
  • D. 0.5292
Answer: C

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