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: Jul 26, 2026

Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

SectionWeightObjectives
Topic 1: Calculus and Functions20%- Multivariable calculus
  • 1. Partial derivatives
    • 2. Optimization
      - Single-variable calculus
      • 1. Integrals and applications
        • 2. Derivatives and applications
          • 3. Limits and continuity
            Topic 2: Numerical Methods & Financial Mathematics15%- Root finding and approximation
            - Basics of risk modeling
            - Time value of money
            Topic 3: Statistics and Regression Analysis20%- Linear regression
            • 1. Hypothesis testing and confidence intervals
              • 2. Simple and multiple regression
                - Descriptive statistics
                • 1. Measures of location and dispersion
                  • 2. Correlation and covariance
                    Topic 4: Probability Theory25%- Basic probability concepts
                    • 1. Axioms and rules
                      • 2. Conditional probability and independence
                        - Random variables and distributions
                        • 1. Discrete and continuous distributions
                          • 2. Expected value, variance, covariance
                            Topic 5: Linear Algebra and Matrix Theory20%- Matrix operations
                            • 1. Addition, multiplication, inversion
                              • 2. Determinants and trace
                                - Vectors and eigenvalues
                                • 1. Eigenvalues and eigenvectors
                                  • 2. Diagonalization

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

                                    1. Suppose I trade an option and I wish to hedge that option for delta and vega. Another option is available to trade. To complete the hedge I would

                                    A) trade the other option in such a way as to make the portfolio delta and vega neutral.
                                    B) trade the other option in such a way as to make the portfolio vega neutral, and then trade the underlying in such a way as to make the portfolio delta neutral.
                                    C) trade the underlying in such a way as to make the portfolio delta neutral, and then trade the other option in such a way as to make the portfolio vega neutral.
                                    D) trade the underlying in such a way as to make the portfolio delta and vega neutral.


                                    2. 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) 2/5 and 3/5
                                    B) 1/3 and 8/17
                                    C) 2/5 and 1/2
                                    D) 9/25 and 12/25


                                    3. Two vectors are orthogonal when:

                                    A) their components are linearly dependent
                                    B) their determinant is zero
                                    C) one is a scalar multiple of the other
                                    D) their scalar product (sum product) is zero


                                    4. What is the 40th term in the following series: 4, 14, 30, 52, ...?

                                    A) 4960
                                    B) 4598
                                    C) 4840
                                    D) 240


                                    5. At what point x does the function f(x) = x3 - 4x2 + 1 have a local minimum?

                                    A) 2.66667
                                    B) 2
                                    C) -0.666666667
                                    D) 0


                                    Solutions:

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

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