Name: PRMIA Mathematical Foundations of Risk Measurement ? 2015 Edition Exam
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Free PRMIA Mathematical Foundations of Risk Measurement ? 2015 Edition Exam Actual Questions

The questions for Mathematical Foundations of Risk Measurement ? 2015 Edition were last updated On Apr. 05, 2024

Question #1

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:

A0.5290

B0.5292

C0.5286

D0.5288

Reveal Solution

Correct Answer: D

Question #2

What is a Hessian?

ACorrelation matrix of market indices

BThe vector of partial derivatives of a contingent claim

CA matrix of second derivatives of a function

DThe point at which a minimum of a multidimensional function is achieved

Reveal Solution

Correct Answer: C

Question #3

The Newton-Raphson method

Ais based on finding a middle point between left and right end of the search interval

Bis based on Taylor series and uses the first derivative

Ccan be used for continuous but not differentiable functions

Ddoes provide an error bound along with every iteration

Reveal Solution

Correct Answer: B

Question #4

Which of the following can be used to evaluate a regression model?

(i) Magnitude of R2

(ii) Magnitude of TSS (total sum of squares)

(iii) Tests for statistical significance

(iv) Sign and magnitude of each regression parameter

A(i) and (iv)

B(i), (ii), and (iii)

C(i), (iii), and (iv)

D(i), (ii), (iii), and (iv)

Reveal Solution

Correct Answer: C

Question #5

A 95% confidence interval for a parameter estimate can be interpreted as follows:

AThe probability that the real value of the parameter is within this interval is 95%.

BThe probability that the real value of the parameter is outside this interval is 95%.

CThe probability that the estimated value of the parameter is within this interval is 95%.

DThe probability that the estimated value of the parameter is outside this interval is 95%.

Reveal Solution

Correct Answer: A

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