A stock trader will generally have access to daily, weekly, monthly, or quarterly price data for a stock or a stock portfolio. Using this data he can calculate corresponding returns from the stock (daily, weekly, monthly, quarterly returns). He can use this data to calculate the standard deviation of the stock returns. The standard deviation […]
PRM Exam II
How to Study for PRMIA Mathematics Section
The exam II of the PRM Certification conducted by PRMIA is about mathematical foundations of risk management. As the risk management profession becomes more important and dependent on quantitative models, it is essential for a risk manager to possess adequate quantitative skills and knowledge of mathematics concepts as applicable to risk management. In the overall […]
All About PRM Exam II
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 […]
Statistical Foundations: Mean and Standard Deviation
Many financial calculations and estimations require a statistical analysis of the variability of past market returns. Because we have strong evidence that market returns are approximately normally distributed, we can estimate potential market movements with a given probability using two simple parameters: mean (or average return) and standard deviation (or volatility). Mean Mean describes where […]