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Free PRM Certification - Exam II: Mathematical Foundations of Risk Measurement Practice Questions

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Exam style questions across every 8002 domain

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Total Questions : 132

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Question # 11

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

Options:

A.  

1 / (x+y)

B.  

(∆x + ∆y) / (x+y)

C.  

-∆x/(x+y) - ∆y/(x+y)

D.  

ln(x+y) ∆x + ln(x+y) ∆y

Discussion 0
Question # 12

Maximum likelihood estimation is a method for:

Options:

A.  

Finding parameter estimates of a given density function

B.  

Estimating the solution of a partial differential equation

C.  

Solving a portfolio optimization problem

D.  

Estimating the implied volatility of a simple European option

Discussion 0
Question # 13

An asset price S is lognormally distributed if:

Options:

A.  

the change in price (dS) is normally distributed

B.  

1/S is normally distributed

C.  

ln(dS/S) is normally distributed

D.  

ln(1+dS/S) is normally distributed

Discussion 0
Question # 14

Simple linear regression involves one dependent variable, one independent variable and one error variable. In contrast, multiple linear regression uses…

Options:

A.  

One dependent variable, many independent variables, one error variable

B.  

Many dependent variables, one independent variable, one error variable

C.  

One dependent variable, one independent variable, many error variables

D.  

Many dependent variables, many independent variables, many error variables

Discussion 0
Question # 15

An operational risk analyst models the occurrence of computer failures as a Poisson process with an arrival rate of 2 events per year. According to this model, what is the probability of zero failures in one year?

Options:

A.  

0.02

B.  

0.14

C.  

0.25

D.  

0.50

Discussion 0
Question # 16

Variance reduction is:

Options:

A.  

A technique that is applied in regression models to improve the accuracy of the coefficient estimates

B.  

A numerical method for finding portfolio weights to minimize the variance of a portfolio that has a given expected return

C.  

A numerical method for finding the variance of the underlying that is implicit in a market price of an option

D.  

A method for reducing the number of simulations required in a Monte Carlo simulation

Discussion 0
Question # 17

Consider two functions f(x) and g(x) with indefinite integrals F(x) and G(x), respectively. The indefinite integral of the product f(x)g(x) is given by

Options:

A.  

F(x)G(x)

B.  

F(x)g(x) + f(x)G(x)

C.  

F(x)g(x) - ∫F(x)g'(x)dx

D.  

f(x)G(x) - ∫F(x)g'(x)dx

Discussion 0
Question # 18

What is the angle between the following two three dimensional vectors: a=(1,2,3), b=(-4,2,0)?

Options:

A.  

90 degrees

B.  

180 degrees

C.  

57 degrees

D.  

45 degrees

Discussion 0
Question # 19

A typical leptokurtotic distribution can be described as a distribution that is relative to a normal distribution

Options:

A.  

peaked and thin at the center and with heavy (fat) tails

B.  

peaked and thin at the center and with thin tails

C.  

flat and thick at the center and with heavy (fat) tails

D.  

flat and thick at the center and with thin tails

Discussion 0

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