Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition
Last Update September 18, 2024
Total Questions : 287
Our PRM Certification 8006 exam questions and answers cover all the topics of the latest Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition exam, See the topics listed below. We also provide PRMIA 8006 exam dumps with accurate exam content to help you prepare for the exam quickly and easily. Additionally, we offer a range of PRMIA 8006 resources to help you understand the topics covered in the exam, such as PRM Certification video tutorials, 8006 study guides, and 8006 practice exams. With these resources, you can develop a better understanding of the topics covered in the exam and be better prepared for success.
| Exam Name | Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition |
| Exam Code | 8006 |
| Actual Exam Duration | The duration of the PRMIA 8006 Exam is 2 hours. |
| What exam is all about | PRMIA 8006 is an exam that tests the knowledge and skills of candidates in the area of risk management. It is a part of the Professional Risk Manager (PRM) certification program offered by the Professional Risk Managers' International Association (PRMIA). The exam covers topics such as financial markets, risk management frameworks, credit risk, operational risk, market risk, and quantitative analysis. The PRMIA 8006 exam is designed to assess the candidate's ability to identify, measure, and manage various types of risks in financial institutions and other organizations. Passing this exam is a prerequisite for obtaining the PRM certification. |
| Passing Score required | The passing score required in the PRMIA 8006 Exam is 60%. This means that a candidate must answer at least 60% of the questions correctly to pass the exam and earn the PRMIA certification. The exam consists of 100 multiple-choice questions, and candidates have 2 hours to complete it. The questions cover various topics related to risk management, including financial markets, credit risk, operational risk, and quantitative analysis. Candidates who pass the exam demonstrate their knowledge and understanding of risk management principles and practices, which can help them advance their careers in the financial industry. |
| Competency Level required | Based on my research, the PRMIA 8006 exam is designed for professionals who have a strong understanding of financial risk management concepts and practices. It is recommended that candidates have a minimum of two years of experience in the field of financial risk management before attempting the exam. Additionally, candidates should have a solid understanding of financial mathematics, statistics, and probability theory. The exam is designed to test the candidate's ability to apply these concepts to real-world scenarios and make informed decisions based on risk analysis. |
| Questions Format | The PRMIA 8006 exam consists of multiple-choice questions. |
| Delivery of Exam | PRMIA 8006 exam is an online proctored exam that can be taken from anywhere with a stable internet connection. The exam is delivered through the PRMIA testing platform, which is accessible through a web browser. The exam consists of 80 multiple-choice questions and has a time limit of 2 hours. The exam is designed to test the candidate's knowledge and understanding of the principles of risk management, as well as their ability to apply these principles in real-world scenarios. |
| Language offered | Based on my research, the PRMIA 8006 exam is focused on financial risk management and is designed to test the candidate's knowledge of financial markets, risk management techniques, and quantitative analysis. Therefore, it is likely that the language used in the exam will be technical and specialized, with a focus on financial terminology and concepts. The exam may also include mathematical equations and formulas, as well as case studies and scenarios that require critical thinking and problem-solving skills. |
| Cost of exam | You can visit the official PRMIA website or contact their customer support team to get the latest pricing information. |
| Target Audience | Based on my research, the target audience for PRMIA 8006 (Risk Management Frameworks and Operational Risk) is professionals working in the financial industry, including risk managers, compliance officers, auditors, and regulators. The certification is also suitable for individuals who want to enhance their knowledge and skills in risk management and operational risk. |
| Average Salary in Market | The PRMIA website, the PRMIA 8006 exam certification is designed for risk managers, and it covers topics such as credit risk, market risk, operational risk, and risk management frameworks. Obtaining this certification can enhance your knowledge and skills in risk management, which can lead to better job opportunities and higher salaries. The salary range after obtaining the PRMIA 8006 exam certification may vary depending on factors such as your experience, location, and industry. It is best to research current market trends and job postings to get a better idea of the average salary range. |
| Testing Provider | You can visit the official website of PRMIA (Professional Risk Managers' International Association) to find information about the 8006 exam and how to register for it. Additionally, there are various online platforms that offer study materials and practice exams for the PRMIA 8006 exam. |
| Recommended Experience | PRMIA 8006 exam is designed for professionals who want to enhance their knowledge and skills in the area of risk management. The recommended experience for this exam includes: 1. A basic understanding of financial markets and instruments 2. Knowledge of probability theory and statistics 3. Familiarity with financial risk management concepts and techniques 4. Experience in risk management or related fields such as finance, accounting, or economics 5. Understanding of regulatory requirements and compliance issues related to risk management. It is also recommended that candidates have completed the PRMIA 8001 exam or have equivalent knowledge and experience in risk management. |
| Prerequisite | The prerequisite for the PRMIA 8006 exam is to have a basic understanding of financial markets, risk management concepts, and quantitative analysis. It is recommended that candidates have completed the PRMIA Operational Risk Manager (ORM) certification or have equivalent knowledge and experience in operational risk management. Additionally, candidates should have a good understanding of statistical analysis, probability theory, and financial modeling. |
| Retirement (If Applicable) | It is recommended to check with PRMIA or their official website for the latest updates on exam retirement dates. |
| Certification Track (RoadMap): | The PRMIA 8006 exam is part of the Professional Risk Manager (PRM) certification program offered by the Professional Risk Managers' International Association (PRMIA). The PRMIA 8006 exam is focused on the topics of risk management and investment management, and is designed to test the knowledge and skills of candidates in these areas. The certification track or roadmap for the PRMIA 8006 exam involves several steps, including: 1. Enrolling in the PRM certification program and completing the required coursework and exams for Levels I, II, and III. 2. Preparing for the PRMIA 8006 exam by studying the exam syllabus and recommended reading materials. 3. Registering for the exam and scheduling a test date. 4. Taking the PRMIA 8006 exam and achieving a passing score. 5. Continuing to maintain the PRM certification by completing ongoing professional development and continuing education requirements. Overall, the PRMIA 8006 exam is an important step in the PRM certification process, and is designed to help candidates demonstrate their knowledge and expertise in risk management and investment management. |
| Official Information | https://prmia.org/Public/PRM/Students.aspx |
| Take Self-Assessment | Use PRMIA 8006 Practice Test to Assess your preparation - Save Time and Reduce Chances of Failure |
| Section | Weight | Objectives |
|---|---|---|
| I. FINANCE THEORY | 17% | A. Arbitrage Pricing Theory 1. Describe how arbitrage pricing theory can be used for decision-making. B. The CAPM and Multifactor Models 1. Outline the components of the Capital Asset Pricing Model (CAPM), including the risk premium, systematic and idiosyncratic risk, beta, security market line, and its underlying assumptions. 2. Compare and contrast single-factor (e.g., Capital Asset Pricing Model (CAPM)) and multifactor models. 3. Compare and contrast the capital asset pricing model and the single-index model. C. Capital Structures 1. Outline the factors to be considered to determine the capital structure of a firm, in particular agency costs, taxes, and leverage. D. Mean-Variance Portfolio Theory 1. Relate mean-variance portfolio theory to asset allocation decisions, with risky assets and a risk-free asset (e.g., asset correlation, efficient frontier, market portfolio, capital allocation line, capital markets line, dominated portfolio, and separation principal). 2. Describe the axioms and assumptions of utility theory with respect to expected return and risk, and describe its application to the mean-variance portfolio theory. E. Performance Measures 1. Calculate the Sharpe ratio and Jensen’s Alpha, and interpret the results. 2. Identify and describe risk adjusted performance measures, in particular RAROC, RORAC, RARORAC, RoVaR, and the Treynor, Information, and Omega ratios, and the Sortino and Kappa indices. 3. Calculate value-at-risk (VaR) for a portfolio. F. The Term Structure of Interest Rates 1. Define the term structure of interest rates and demonstrate how to construct a yield curve from observable bond pricing. 2. Describe the standard theories used to explain the observed shape of the yield curve: a) pure expectations theory, b) liquidity preference theory, c) preferred habitat theory, and 4) market segmentation theory. 3. Understand the concepts of duration and convexity, and describe the impact of an embedded call or put on the duration convexity and the price of a bond. 4. Compare and contrast the Ho-Lee, Hull-White, and Black-Derman-Toy models. G. Regulatory Frameworks 1. Compare and contrast capital management and regulatory capital and relate capital management to solvency and Basel. 2. Describe the application of an internal capital adequacy process to achieve efficient capital allocation. H. Trade Terminology 1. Illustrate the best choice of available options to execute trading for optimization of return. 2. Describe the lifecycle of a trade and distinguish between dealing and settlement. |
| II. FINANCIAL INSTRUMENTS | 14% | A. Bonds 1. Understand the characteristics of bonds, using concepts of duration, convexity, and yield. 2. Price different types of bonds (e.g., zero coupon, fixed/floating, investment/non-investment grade, etc.) B. Forward and Futures Contracts 1. Understand the relationship between spot and forward prices. 2. Value a forward contract using concepts of interest differential and delivery cost. 3. Understand the standardized characteristics of futures contract, for bonds, stocks, currencies, and commodities. C. Swaps 1. Understand the key components of a swap agreement and value a vanilla interest rate swap. 2. Understand features of various types of swaps on instruments (e.g.,currencies, bonds, equities, commodities, assets, etc.) D. Options 1. Identify and understand the components of option valuation. 2. Verify an option price using a given methodology (e.g., binomial models, Black-Scholes-Merton, etc.) 3. Identify different option trading strategies. E. Credit Derivatives 1. Apply the concepts of default probability and loss given default in determining a credit default swap premium. 2. Understand different types of credit derivatives and securitized products. F. Hedging Strategies 1. Understand hedging strategies for specific risk exposures within a portfolio. 2. Calculate hedge ratios using cash instruments or derivatives (e.g., forwards, futures, swaps, and options.) |
| III. FINANCIAL MARKETS | 16% | A. Participants in and the Structure of Financial Markets 1. Define and describe the various participants within financial markets (e.g., banks, brokers, front/middle/back office, underwriter, participants, etc.) 2. Discuss the structure of financial markets. 3. Distinguish between the various markets (e.g., bonds, FX, stocks, etc.), trading systems (e.g., over-the-counter (OTC), ECN, “open cry”, etc.), and settlement processes (e.g., straight-through). 4. Assess and analyze the capital structure of entities. B. Bond Markets 1. Define and describe the characteristics of bond markets. 2. Interpret how an agency rating impacts the spread. C. Money Market Securities 1. Define and describe money market securities (e.g., T-bills, CDs, CPs, BA, etc.). 2. Discuss significant funding rates (e.g., Euro Interbank Offered Rate (Euribor), London Interbank Offered Rate (LIBOR), Overnight Index Swap (OIS), and Euro Over Night Index Average (EONIA).) 3. Calculate the bond equivalent yield of money market securities. D. Stock Market 1. Define and describe the characteristics of stock markets. E. Foreign Exchange Markets 1. Discuss foreign exchange markets (both spot and forward) and describe various characteristics of these markets. 2. Calculate and interpret the cross rate given two FX rates. F. Energy Markets 1. Define and describe the various elements of energy markets, including emerging energy markets. G. Commodities Markets 1. Define and describe the various elements of commodities markets and the distinguishing features of these markets. H. Real Estate Evaluation 1. Describe different sectors within real estate (e.g., commercial, industrial, residential) and outline risks associated with lending or investing in real estate. I. Futures Markets 1. Discuss the rationale for futures markets and describe the settlement and clearing processes. |
| IV. MATHEMATICAL FOUNDATIONS OF RISK MEASUREMENT | 13% | A. Algebraic Methods 1. Solve equations using algebraic methods (e.g., linear and quadratic equations). B. Calculus Methods Related to Risk Management 1. Apply calculus methods (e.g., exponential and integration, approximation, differentiation, stochastic, etc.) to risk management. C. Basic Statistics Related to Risk Management 1. Compute and interpret basic statistical measures relating to risk management (e.g., mean, standard deviation, kurtosis, correlation, etc.). 2. Understand the application of extreme value theory. D. Numerical Methods 1. Discuss, calculate, and interpret various optimization and numerical methods (e.g., LaGrange, Newton-Raphson, Monte Carlo simulation, Multi-state Markov model, etc.). E. Matrix Algebra 1. Understand and apply matrix algebra as it relates to risk management (e.g., Cholesky decomposition, etc.). 2. Calculate and interpret principal components analysis (PCA). 3. Solve linear simultaneous equations using matrix algebra. F. Probability Theory in Finance 1. Understand probability theory including Bayesian theory. 2. Calculate, apply, and interpret probability distributions (e.g., normal, lognormal, Poisson, Copula, probit, and logit models). G. Regression Analysis in Finance 1. Understand and interpret time series, simple, and multiple linear regression. 2. Apply confidence intervals and hypothesis testing. H. Compounding Methods 1. Use compounding methods (continuous and discrete) and describe the differences between the two. |
TESTED 19 Sep 2024
