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PRMIA 8007 Exam Syllabus Topics:
| Section | Objectives |
|---|---|
| Probability Theory | - Fundamental Probability Concepts
|
| Linear Algebra | - Matrix Methods
|
| Risk Measurement Applications | - Quantitative Risk Analysis
|
| Statistical Analysis | - Descriptive and Inferential Statistics
|
| Numerical Methods | - Quantitative Techniques
|
| Regression and Time Series Analysis | - Modeling Techniques
|
| Calculus | - Differential and Integral Calculus
|
PRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Sample Questions:
Which of the following is not a direct cause of autocorrelation or heteroskedasticity in the residuals of a regression model?
- A. Using an inappropriate functional form in the model
- B. The omission of a relevant explanatory variable
- C. A high positive correlation between two explanatory variables
- D. A structural break in the dependent variable
Correct Answer: C 🗳️
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. 0.5286
- B. 0.5292
- C. 0.5290
- D. 0.5288
Correct Answer: D 🗳️
Consider the linear regression model for the returns of stock A and the returns of stock B. Stock A is 50% more volatile than stock B. Which of the following statements is TRUE?
- A. The stocks must be positively correlated ( )
- B. Beta must be positive ( )
- C. Alpha must be positive ( )
- D. Beta must be greater in absolute value than the correlation of the stocks ( )
Correct Answer: D 🗳️
A typical leptokurtotic distribution can be described as a distribution that is relative to a normal distribution
- A. flat and thick at the center and with heavy (fat) tails
- B. peaked and thin at the center and with heavy (fat) tails
- C. peaked and thin at the center and with thin tails
- D. flat and thick at the center and with thin tails
Correct Answer: B 🗳️
An underlying asset price is at 100, its annual volatility is 25% and the risk free interest rate is 5%. A European put option has a strike of 105 and a maturity of 90 days. Its Black-Scholes price is 7.11. The options sensitivities are: delta = -0.59; gamma = 0.03; vega = 19.29. Find the delta-gamma approximation to the new option price when the underlying asset price changes to 105
- A. 4.54
- B. 4.59
- C. 6.49
- D. 5.03
Correct Answer: A 🗳️
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