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 r

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