PDF Version DemoPRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Sample Questions:
1. The bisection method can be used for solving f(x)=0 for a unique solution of x, when
A) The function f(x) is continuous and monotonic
B) The function f(x) is differentiable
C) The function f(x) is continuous
D) The function f(x) is differentiable and we have an explicit expression for the derivative
2. If a time series has to be differenced twice in order to be transformed into a stationary series, the original series is said to be:
A) differential
B) integrated of order 2
C) non-functional
D) non-linear
3. Suppose a discrete random variable can take on the values -1, 0 and 1 each with a probability of 1/3. Then the mean and variance of the variable is
A) mean is 0, variance is 2/3
B) mean is 1/3, variance is 1/3
C) mean is 0, variance is 1/2
D) mean is 0, variance is 1/3
4. In statistical hypothesis tests, 'Type I error' refers to the situation in which...
A) The null hypothesis is accepted when in fact it should have been rejected
B) Both null hypothesis and alternative hypothesis are rejected
C) Both null hypothesis and alternative hypothesis are accepted
D) The null hypothesis is rejected when in fact it should have been accepted
5. An underlying asset price is at 100, its annual volatility is 25% and the risk free interest rate is 5%. A European put option has a strike of 105 and a maturity of 90 days. Its Black-Scholes price is 7.11. The options sensitivities are: delta = -0.59; gamma = 0.03; vega = 19.29. Find the delta-gamma approximation to the new option price when the underlying asset price changes to 105
A) 6.49
B) 5.03
C) 4.59
D) 4.54
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: B | Question # 3 Answer: A | Question # 4 Answer: D | Question # 5 Answer: D |
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