# PRM Exam II: Mathematical Foundations of Risk Measurement

Exam II of the PRM Certification programs tests a candidate's knowledge and understanding of the mathematical foundations of risk measurement. 24 questions need to be answered in 2 Hours with 60% accuracy to pass the Computer based exam with multiple choice questions. A good number of mathematical concepts covered in this exam will be helpful for implementing risk mitigation strategies and play a key role in different types of risk - Operational Risk, Credit risk and Market Risk. An associate in Risk management who becomes a certified risk manager or a risk Analyst requires a good knowledge of various mathematical as well as statistical concepts to implement effective strategies. Quantitative techniques become handy for Risk Analytics, Risk assessment tools, Risk Evaluation and Risk Measurement. A lot of these concepts are tested in FRM exam as well.

## Key Topics Covered

Symbols and Rules | Sequences and Series | Exponents | Logarithms |

Equations | Inequalities | Functions and Graphs | Time value of Money |

Frequency Distribution | Moments | Central Tendency | Dispersion |

Bivariate Data | Differential Calculus | Modified Duration | Higher Order Derivatives |

Taylor Approximation | Convexity | Delta and Gamma | Partial Differentiation |

Integral Calculus | Maxima and Minima | Matrix Algebra | Portfolio Construction |

Hedging Options | Cholesky Decomposition | Eigen Values and Eigen Vectors | Principal Component Analysis |

Probability | Probability Distributions | Joint Distributions | Binomial Distribution |

Poisson Distribution | Uniform Distribution | Lognormal Distribution | t- Distribution |

Normal Distribution | Simple Regression | Multiple Regression | Confidence Interval |

Hypothesis Testing | Prediction | Heteroscedasticity | Autocorrelation |

Multicollinearity | Random Walks | Mean-Reversion | Maximum Likelihood Estimation |

Numerical Methods | Solving Equations | Numerical Optimisation | Binomial Lattices |

Simulation | Goal Seek | Solver | Finite Difference |

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