Changes to Exams FM/2, M and C/4 for the May 2007 Administration

　　Listed below is a summary of the changes, transition rules, and the complete exam listings as they will appear in the May 2007 Basic Education Catalog.

　　Summary of Changes

　　Exam FM/2:
　　• Add an introduction to financial derivatives, (forwards, options, futures, swaps) and their use in risk management. 
　　• Add an introduction to the concept of no-arbitrage as a fundamental concept in financial mathematics.
　　• To accommodate the additional material, expand Exam FM/2 to a 2.5-hour multiple-choice examination.

　　Exam M:

　　• Add learning outcomes on option pricing: put-call parity, the binomial model, and Black-Scholes formula.  A study note introducing actuarial applications of 　option pricing.
　　• Add learning outcomes on interpretation of option Greeks and delta-hedging
　　• Add learning outcomes on the features of exotic options.
　　• Add an introduction to Brownian motion and Itô’s lemma.
　　• To accommodate the additional material, move loss models, including risk theory, to Exam C/4.
　　• Given the relative increase in the amount of material, expand Exam M to a 5-hour multiple-choice examination.

　　
　　
　　SOA Transition Rules

　　There will be no special transition rules in that candidates with credit for any of Exams FM/2, M or C/4 before May 2007 will retain credit for those exams on May 2007.

　　Full May 2007 Catalog Listings

　　Exam FM  Financial Mathematics

　　The examination for this material consists of two and one-half hours of multiple-choice questions and is identical to CAS Exam 2.
　　The goal of the Financial Mathematics course of reading is to provide an understanding of the fundamental concepts of financial mathematics, and how those 　concepts are applied in calculating present and accumulated values for various streams of cash flows as a basis for f

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