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PRMIA 8007 Exam Syllabus Topics:

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

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

In a multiple linear regression, the significance of R2 can be tested using which distribution?

  • A. Normal distribution
  • B. F-distribution
  • C. Student's t distribution
  • D. Binomial distribution
Answer: B

Suppose a discrete random variable can take on the values -1, 0 and 1 each with a probability of 1/3. Then the mean and variance of the variable is

  • A. mean is 0, variance is 2/3
  • B. mean is 0, variance is 1/2
  • C. mean is 0, variance is 1/3
  • D. mean is 1/3, variance is 1/3
Answer: A

If A and B are two events with P(A) = 1/4, P(B) = 1/3 and P(A intersection B) =1/5, what is P(Bc | Ac) i.e. the probability of the complement of B when the complement of A is given?

  • A. 37/45
  • B. 3/4
  • C. None of these
  • D. 12/29
Answer: A

You intend to invest $100 000 for five years. Four different interest payment options are available. Choose the interest option that yields the highest return over the five year period.

  • A. a continuously-compounded rate of 4%
  • B. a quarterly-compounded rate of 4.1%
  • C. a lump-sum payment of $22 500 on maturity (in five years)
  • D. an annually compounded rate of 4.15%
Answer: B

The correlation between two asset returns is 1. What is the smallest eigenvalue of their correlation matrix?

  • A. 1
  • B. None of the above
  • C. 0.5
  • D. 0
Answer: D

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