IAI CM2 study guide
IAI CM2 · Work through your exam, one topic at a time.
CM2, Actuarial Mathematics Core Practices, is one of the Core Practice subjects in the Institute of Actuaries of India (IAI) actuarial examination pathway. It sits after the Core Principles subjects and is aimed at candidates who already know the fundamentals of probability, interest theory and life contingencies and now need to apply them with professional judgement. The IAI CM2 study guide has 10 sections and about 3,449 words.
01Survival Models and Life Table Functions
This domain tests how future lifetime is modelled as a random variable and how life-table columns convert survival models into probabilities, expected times and annuity factors. For a life aged x, T x is the future lifetime and K x = floor(T x) is the curtate future lifetime.
413 words, about 2 min02Mortality Estimation and Graduation
This domain tests how crude mortality rates are estimated from exposed-to-risk data and how those rates are smoothed into a graduated table suitable for pricing and valuation. The central exposed to risk E x^c is the total time lived in the age interval, often approximated by the mid-year population.
365 words, about 2 min03Life Insurance and Annuity Contracts
This domain tests the present value random variables for life insurance and annuity contracts, and the relationships that let you switch between them. A whole-life assurance pays on death whenever it occurs.
374 words, about 2 min04Premium and Policy Value Calculations
This domain tests the equivalence principle, net and gross premiums, and the prospective and retrospective calculation of policy values. The net premium ignores expenses and uses the equivalence principle: EPV premiums = EPV benefits.
355 words, about 2 min05Pension and Other Benefit Schemes
This domain tests defined benefit and defined contribution pension design, funding methods, and the actuarial valuation of retirement benefits. A defined benefit (DB) scheme promises a pension usually linked to salary and service.
317 words, about 2 min06Principles of Actuarial Modelling
This domain tests how actuaries choose, build, calibrate, validate and communicate models, and how they allow for uncertainty in projections. A model is a simplified representation of reality.
307 words, about 2 min07Brownian Motion and Stochastic Calculus
This domain tests the construction and properties of Brownian motion, stochastic differential equations and Ito's lemma. Standard Brownian motion W t starts at 0, has independent normal increments W t - W s ~ N(0, t - s), and has continuous but nowhere differentiable paths.
362 words, about 2 min08Martingales and Stochastic Integration
This domain tests filtrations, martingales, Ito integrals, stopping times and change of measure. A filtration represents information available over time.
347 words, about 2 min09Option Pricing and Black-Scholes Framework
This domain tests risk-neutral valuation, put-call parity, the Black-Scholes formula and the binomial model. A European call pays max(S T - K, 0) at maturity.
319 words, about 2 min10Interest Rate Models and Term Structure
This domain tests spot, forward and yield curves, short-rate models and no-arbitrage term-structure modelling. The discount factor P(t,T) is the value at t of 1 payable at T.
290 words, about 1 min