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PRMIA 8007 Exam Overview:

Certification Vendor:PRMIA (Professional Risk Managers' International Association)
Exam Name:Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition
Exam Number:8007
Exam Format:Multiple-choice questions, Computer-based, No negative marking
Related Certifications:PRMâ„¢ Certification
ORM (Operational Risk Manager)
Available Languages:English
Passing Score:60%
Exam Duration:120 minutes
Exam Price:$650 - $800 USD (varies by PRMIA membership type)
Certificate Validity Period:3 years from passing; must complete all PRM exams within 2 years
Real Exam Qty:132
Recommended Training:PRMIA Official Handbook & Study Materials
PRMIA Recommended Preparation Resources
Exam Registration:Pearson VUE Scheduling
PRMIA Official Registration
Sample Questions:PRMIA 8007 Sample Questions
Exam Way:Online proctored or onsite at Pearson VUE testing centers
Pre Condition:PRMIA membership; bachelor's degree + 2 years experience OR 4 years experience without degree; graduate degree or relevant professional designation may waive experience requirement
Official Syllabus URL:https://prmia.org/Public/PRM/PRM_Handbook_Digital%20Resources.aspx

PRMIA 8007 Exam Syllabus Topics:

SectionWeightObjectives
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
          Calculus and Functions20%- Multivariable calculus
          • 1. Partial derivatives
            • 2. Optimization
              - Single-variable calculus
              • 1. Derivatives and applications
                • 2. Integrals and applications
                  • 3. Limits and continuity
                    Probability Theory25%- Basic probability concepts
                    • 1. Conditional probability and independence
                      • 2. Axioms and rules
                        - Random variables and distributions
                        • 1. Expected value, variance, covariance
                          • 2. Discrete and continuous distributions
                            Linear Algebra and Matrix Theory20%- Vectors and eigenvalues
                            • 1. Diagonalization
                              • 2. Eigenvalues and eigenvectors
                                - Matrix operations
                                • 1. Addition, multiplication, inversion
                                  • 2. Determinants and trace
                                    Numerical Methods & Financial Mathematics15%- Time value of money
                                    - Root finding and approximation
                                    - Basics of risk modeling

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

                                    1. When the errors in a linear regression show signs of positive autocorrelation, which of the statements below is true?

                                    A) The regression coefficient will be too high and the standard error of the regression coefficient will be understated
                                    B) The regression coefficient will be unbiased, but the standard error of the regression coefficient will be understated
                                    C) The regression coefficient will be unbiased, but the standard error of the regression coefficient will be overstated
                                    D) The regression coefficient will be too low and the standard error of the regression coefficient will be overstated


                                    2. What is the simplest form of this expression: log2(165/2)

                                    A) log2 (5/2) + log2(16)
                                    B) 5/2 + log2(16)
                                    C) 32
                                    D) 10


                                    3. 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) 3/4
                                    B) 37/45
                                    C) 12/29
                                    D) None of these


                                    4. What is the total derivative of the function f(x,y) = ln(x+y), where ln() denotes the natural logarithmic function?

                                    A) (x + y) / (x+y)
                                    B) -x/(x+y) - y/(x+y)
                                    C) ln(x+y) x + ln(x+y) y
                                    D) 1 / (x+y)


                                    5. Suppose we perform a principle component analysis of the correlation matrix of the returns of 13 yields along the yield curve. The largest eigenvalue of the correlation matrix is 9.8. What percentage of return volatility is explained by the first component? (You may use the fact that the sum of the diagonal elements of a square matrix is always equal to the sum of its eigenvalues.)

                                    A) 64%
                                    B) 75%
                                    C) 98%
                                    D) Cannot be determined without estimates of the volatilities of the individual returns


                                    Solutions:

                                    Question # 1
                                    Answer: C
                                    Question # 2
                                    Answer: D
                                    Question # 3
                                    Answer: B
                                    Question # 4
                                    Answer: A
                                    Question # 5
                                    Answer: B

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