Definitive Guide to CM2 (Financial Engineering & Loss Reserving)

With a focus on stochastic asset and liability models and the valuation of financial derivatives, the goal of the Financial Engineering and Loss Reserving subject is to give students a foundation in modeling principles as they relate to actuarial work. Critically analyzing contemporary financial ideas and interacting with other financial professionals both call on these abilities.

Concepts introduced in the following subjects are used in Subject CM2:
● CS1 Actuary – Actuarial Statistics 1
● CS2 Actuary – Risk Modelling and Survival Analysis
● CM1 Actuary – Actuarial Mathematics 1
● CB2 Actuary – Business Economics.

CP1 – Actuarial Practice
CP2 – Modelling Practice
SP5 – Investment and Finance Principles
SP6 – Financial Derivatives Principles
SP9 – Enterprise Risk Management Principles

1. Theories of financial market behaviour (15%)
2. Measures of investment risk (15%)
3. Stochastic investment return models (10%)
4. Asset valuations (20%)
5. Liability valuations (20%)
6. Option theory (20%) These weightings are indicative of the approximate balance of the assessment of this subject between the main syllabus topics, averaged over a number of examination sessions.

The weightings, which are averaged over several exam sessions, show how this subject is evaluated in relation to the major syllabus themes.

Additionally, the weightings correlate with the quantity of learning content that underpins each syllabus item. But this will also take into account things like:

Given the relative complexity of each topic and the amount of explanation and support needed for it, it is necessary to offer a solid comprehension of the subject matter before moving on to the other objectives the anticipated level of prior knowledge and the degree to which each topic area is more application- or knowledge-based.

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A syllabus aim does not necessarily limit the kind of questions that can be posed about the subject matter it covers just because it uses a particular command verb. The document “Command verbs used in the Associate and Fellowship written examinations” defines the agreed-upon command verbs that the Examiners may use when posing a question on any topic included in the curriculum.

Any skill level may be used to set the questions: Application (showing the ability to apply the underlying principles of the topic within a given context), Higher Order (showing the ability to perform deeper analysis and assessment of situations, including forming judgments, taking into consideration) and Knowledge (demonstration of a detailed knowledge and understanding of the topic)

consider many viewpoints, contrasting and comparing circumstances, offering potential fixes and courses of action, and creating suggestions)

The approximate distribution of assessment across the three skill types in the CM topics is 15% Higher Order skills, 65% Application skills, and 20% Knowledge skills.

CM2A is 3 hours and 20 minutes exam, CM2B is 1 hour and 50 minute excel based exam.
Scientific Calculator is allowed in exam. However, you can use only one of the models from the list below. This can also be used for future exams.
1. Casio FX82 (ES/MS) (with or without any suffix)
2. Casio FX83 (ES/MS) (with or without any suffix)
3. Casio FX85 (ES/MS) (with or without any suffix)
4. Sharp EL531 (with or without any prefix or suffix)
5. Texas Instruments BA II Plus (with or without any suffix)
6. Texas Instruments TI-30 (with or without any suffix)
7. Hewlett Packard HP12c (with or without any suffix)

This course provides students with an understanding of financial markets, derivatives, and excel-based reserving strategies.

Two papers will be written about this. Excel programming, financial markets, and reservations are tested in the three hours and twenty-minute paper CM2A and the one hour and fifty-minute exam CM2B. It is required to take both components within the same exam session. Should the total score fall below the passing threshold, both evaluation components must be retaken.

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Combination of a one-hour and forty-five-minute computer-based modelling assignment and a three-hour and fifteen minute written examination. 

Upon passing this course, a student will have the following abilities: 

1. To characterize, decipher, and debate financial market behavior theories.
2. go over the benefits and drawbacks of several investing risk metrics.
3. outline, put together, analyze, and talk about the models that support asset assessments.
4. explain, put together, analyze, and talk about the models that underpin liability assessments..
5. outline, put together, decipher, and talk about the models that underpin option pricing.

In summary, the CM2 test requires a deep understanding of complex concepts. The greatest platform for making the most of your CM2 preparation experience is offered by Academic Junction. Our innovative teaching methods, highly qualified teachers, and goal-oriented approach have consistently produced top performers.

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