PRM Exam I
Exam I of the PRM certification tests a candidate’s knowledge and understanding of the foundations of finance theory, the financial instruments that provide tools for the mitigation or transfer of risk, and the financial markets in which instruments are traded and capital is raised.
Finance Theory
The modern theory of finance is the solid basis of risk management and thus it naturally represents the basis of the PRM certification program. All major areas of finance are involved in the process of risk management: from the expected utility approach and risk aversion, which were the forerunners of the capital asset pricing model (CAPM), to portfolio theory and the risk-neutral approach to pricing derivatives.
This section of PRM Exam I covers all the topics related to Finance Theory.
Interest Rates and Time Value
Risk and Risk Aversion
Portfolio Mathematics
Capital Allocation
The CAPM and Multifactor Models
Basics of Capital Structure
The Term Structure of Interest rates
Valuing Forward Contracts
Basic Principles of Option Pricing
Financial Instruments
Having firmly established the theoretical basis for valuation in the Finance Theory section, the Financial Instruments section applies these theories to the most commonly used financial instruments.
General Characteristics of Bonds
The Analysis of Bonds
Futures and Forwards
Swaps
Vanilla Options
Credit Derivatives
Caps, Floors and Swaptions
Financial Markets
In the Financial Markets section, first a general introduction to world financial markets is provided. They can be variously classified – geographically, by type of exchange, by issuers, liquidity and type of instruments – all are provided here. The importance of liquidity, the distinction between exchange and over-the-counter markets and the role of intermediaries in their various forms are explained in more detail.
The Structure of Financial Markets
The Money Markets
Bond Markets
The Foreign Exchange Market
The Stock Market
The Futures Markets
The Structure of Commodities Markets
The Energy Markets
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