2nd Actuarial exam (FM)

Jomo

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Many years ago I took the 1st actuary exam. It was called exam 100 and it covered Linear Algebra and Calculus. I got a 9 on this exam when I was an undergraduate student.

The SOA said that this exam still counts towards passing exam 1, which now covers probability theory

Now I am considering preparing for the 2nd exam which is in finance. I have a bachelors and masters degree in pure math. My question is how hard is this exam going to be for me given that I never took a finance course?

I looked at the exam and for now it seems like it is in another language so I can't gauge the difficulty of the exam.

I recall that one of the tutors here is in the actuary field (I forget who, sorry) and by friend Denis was in the business field. Hopefully these two and others can reply.

Also any ideas for which textbook to study from?

Thanks!
 

Denis

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I recall that one of the tutors here is in the actuary field (I forget who, sorry) and by friend Denis was in the business field. Hopefully these two and others can reply.
I think you mean Jeff.
What I learned was on my own...on the job...
basically financial formulas and the likes...
Besta luck Sir Jomo.....if Jomo can't, then nobody can!!
 

Jomo

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Yeah I thought it was Jeff. Thanks.
 

Otis

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My first thought was, "tkhunny is the actuary", but maybe I've confused him with Gene.

Jeff is a history major who has retired from the financial industry (as a high-level executive), if memory serves. Well, he's "retired" until some institution needs him to lend a hand.
 

JeffM

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Jomo

Modern economics, particularly financial economics, is heavily mathematicized. When people start talking about atomless measure spaces, I just tune it out because I have no idea what is going on (historians other than Marxists and Hegelians are a bit allergic to the idea that there is history without discrete individuals). However, even I can understand the general meaning of the Kakatuni fixed point theorem without grasping the formal proof.

However, most of the math in theoretical economics is very unlikely to be a problem for any trained mathematician, which I am not. What you may have some difficulty with are the theorems and terminology of financial economic theory that you are expected to know. To give you a flavor of the mathematics involved in the theory of financial economics, I have given the wiki link on the Black Scholes model


In many cases, the math is way simpler than that. For example, here is a definition of "beta" from wiki

"A common expression for beta is

{\displaystyle \beta ={\frac {\mathrm {Cov} (r_{a},r_{b})}{\mathrm {Var} (r_{b})}},}


where Cov and Var are the covariance and variance operators."

The real issue to my mind is how much pure economic theory and vocabulary are you expected to know on this test versus how much math are you expected to know. Presumably, somewhere there is a description that specifies what is being tested. Unless you are trying to get a job on Wall Street as a "quant," the math needed for most careers in finance is very basic: present value and future value formulas and their use plus facility in working with expected value, variance and covariance.
 
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tkhunny

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Many years ago I took the 1st actuary exam. It was called exam 100 and it covered Linear Algebra and Calculus. I got a 9 on this exam when I was an undergraduate student.

The SOA said that this exam still counts towards passing exam 1, which now covers probability theory

Now I am considering preparing for the 2nd exam which is in finance. I have a bachelors and masters degree in pure math. My question is how hard is this exam going to be for me given that I never took a finance course?

I looked at the exam and for now it seems like it is in another language so I can't gauge the difficulty of the exam.

I recall that one of the tutors here is in the actuary field (I forget who, sorry) and by friend Denis was in the business field. Hopefully these two and others can reply.

Also any ideas for which textbook to study from?

Thanks!
I would guess that you are good with objectives 1-4. The next few may take some review. The rest may not have existed when you were last learning this sort of material. There are textbook references. https://www.soa.org/education/exam-req/edu-exam-fm-detail.aspx Click the April 2019 Syllabus. Nothing "life-contingent" in there, yet, but Interest Rate Immunization may be a surprise. Just for the record, I got a 10 on that one. :) However, most folks think that's overkill. It takes enough time just to pass the beasts. Why break your head trying to ace it? Good luck to you.

I just took a quick scan through the sample exam. There were two terms in three questions that I would want to look up before I went in if I were to take it tomorrow. In other words, it does not appear to have changed much over the years.

  1. "Macaulay" anything is a little more emphasized than 1980ish and
  2. "Immunization" has specific theory attached to it.
  3. They seem to love the "perpetuity". Don't let that do anything to you. It's just an infinite series, rather than a finite series. No big on that.
 
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Denis

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Jomo

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Thanks for all the replies! As Denis said, I can do it. A 9 would be nice to get but a 10 is crazy!
 

Subhotosh Khan

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tkhunny

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Thanks for all the replies! As Denis said, I can do it. A 9 would be nice to get but a 10 is crazy!
The standard dogma:

5 - Narrow Fail.
5* - If we graded the whole exam together, you would pass, but you did so poorly on one section that we aren't going to let you pass.
6 - Narrow Pass. Too risky.
7 - Perfect score. You kept it away from the edge.
8 - Well, okay, if you really want to be that way...
9 - Excessive.
10 - Get a life. Why did you do that?
 

Jomo

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As an undergraduate I worked in my college's math lab as well as a government sponsored math lab for 40 hours a week, 30 weeks a year for 4 years. We were always busy and half of the students needed calculus help. I understood Linear Algebra well. So when I took the 1st exam, which (then) covered Calculus and Linear Algebra, I got a 9. I was soooo prepared for this test and I did not get a 10. I can't even imagine getting a 10 on an actuarial exam.
I agree with tkhunny that if you get a 10 you should get a life and ask yourself why did you do that. On the other hand some people are so amazingly brilliant that getting other than a 10 is not possible for them.
 

tkhunny

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As an undergraduate I worked in my college's math lab as well as a government sponsored math lab for 40 hours a week, 30 weeks a year for 4 years. We were always busy and half of the students needed calculus help. I understood Linear Algebra well. So when I took the 1st exam, which (then) covered Calculus and Linear Algebra, I got a 9. I was soooo prepared for this test and I did not get a 10. I can't even imagine getting a 10 on an actuarial exam.
I agree with tkhunny that if you get a 10 you should get a life and ask yourself why did you do that. On the other hand some people are so amazingly brilliant that getting other than a 10 is not possible for them.
Sounds like your experience with the first exam was similar to mine. I had just finished 3 years in my alma mater's math/stats lab and the math/stats lab of a local community college. I also had plenty of background in statistics and other topics, such as numerical methods, interest theory, ordinary differential equations, abstract algebra, and some graduate exposure to real and complex analysis and linear algebra. For my first sitting, I took three actuarial exams with virtually no preparation - maybe a practice exam. I managed a 10, a 7, and a 5. SO CLOSE! No one told me I wasn't supposed to be able to do that. :) As far as the 10 goes, I KNOW I missed two problems on the exam. I solved one of the fails on the drive home - about 80 miles. I nearly wrecked my car. I got the last fail the next morning in the shower. I nearly drowned. Just for the record, on my next sitting, I took two exams and failed both. :-(. After that, I managed every conceivable score. I left exams thinking I did well, and managed all the way down to 0 on one of them. On the other hand, I left exams feeling discouraged and kind of accidentally scored a 9 or some lower passing grade. My wife used to say it was the only difficult thing she had ever seen me attempt in academia. Good times.
 
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