In the previous article we talked about the PRM Exam I, where the focus of the exam was to build the foundation of finance theory, financial instruments, and financial markets.
This article discusses PRM Exam II: Mathematical Foundations of Risk Measurement.
One of the most important aspects of risk management is that the risk managers are able to appropriately measure and assess risk. There are several tools and techniques to do so, however, it’s important for the risk professionals to have a solid foundation of the quants involved in dealing with these measurement methods. This exam aims at building and testing students’ knowledge about the mathematical foundations of risk measurement.
The PRM Level II exam is a multiple-choice exam. There are total 24 questions to be answered in 2 hours time.
PRM Exam II Waiver
If you have any of the following degrees you don’t have to write PRM Exam I, and you can straight away write the next exam.
- CFA Charter Holders
- CIIA, CEFA Charter Holders
- CQF Holders
- Actuarial Fellows
- Actuarial Associate
PRM Exam II Curriculum
The PRM Exam II curriculum focuses on the following topics:
|Topic||Weight||No. of Questions|
|Linear Mathematics and Matrix Algebra||21%||5|
|Probability Theory in Finance||25%||6|
|Regression Analysis in Finance||13%||3|
As you can see, the most important sections are Calculus, Linear Mathematics and Algebra, and Probability Theory in Finance with 16 out of 24 questions coming from these topics.
An important point to note is that the real exam questions will not be pure math type. This means that there is less chance of getting a straightforward question such as “find the limits of a function”. The questions are more inclined towards the finance application of these mathematical concepts. For example, with respect to first and second order derivatives, the questions can be related to the calculation or duration and convexity.
PRM Exam II requires you to have a strong aptitude for mathematics. So, if math is your weak area, then you’re going to find it a difficult exam to crack. Things like probability and statistics are still easy to follow, however, if you haven’t studied calculus at graduate and/or post graduate level, you will have to put in extra hours to master this subject.
PRMIA provides the official PRM Handbook that’s a great resource to prepare for the PRM exam. You can also use Finance Train’s free online material for the PRM Exam.
If you have any questions about the exam, please feel free to ask in the comments section below and I’ll be glad to answer.