 Hi everyone, it's MJ the fellow actuary and in this video, I want to talk about the CM2 Exam. Now I know it's being rebranded as actuarial mathematics number two, but I still kind of see it as financial economics This is what it was referred to back when it was called technical subject number eight Now the big changes is that they've added in a section on behavioral economics And they've also sprinkled in a little bit of insurance stuff. I guess to try and make it more actuarial So, I don't know I kind of preferred the old syllabus when it was just focused on financial economics and just on assets just on market risk whereas now they've added in this liability section and I kind of feel like that should have gone into CS2. Anyway, the big additions are ruin theory Which I absolutely love. I think that's amazing and these other things called runoff triangles Which are perfectly designed for excel and speaking about excel the subject does come with an excel Exam, so not only do you have to do a three-hour written paper like the other subjects But you also have to do a one and a half hour excel exercise And the thing is this excel thing trips up quite a lot of people because you can do it at home And everyone thinks oh, it's relax. You've got your hot chocolate and you kind of stop doing this excel thing And the questions aren't difficult However, it's causing a lot of people to fail because they're running out of time and they've taken it to casually Where you actually have to start this excel exercise and one and a half hours is not a lot of Time in order to do all the things that you need to do However to assist and to help you guys with the excel component I have created a Udemy course where I go through two past papers Step by step just outlining all the things that you need to do showing you all the excel formulas So I'm going to put a link in the description below to that Udemy course Of course, if you're doing my Workshop in Johannesburg or Cape Town You don't have to purchase it because this comes included with the with the cost of the workshop So I'll provide you with coupon codes there But this is the thing is I'm busy preparing these workshops for CM2 And I thought let me make just a general video where I speak about the subject So right at the start you have to do something called rational expectation Theory and this is this whole idea of market efficiency Can you beat the stock exchange or is it better to go active or is it better to go passive and I really really enjoy it Then it does get a little bit more. How would you say it gets very Theoretical especially in the section called expected utility theory and this was something that was started by the Bernoulli brothers Also, not Bernoulli brothers. They were cousins They they played this game in order to develop, you know, why do people make irrational decisions? And this is kind of being extended by also another guy called John for Newman who worked on the Manhattan project Developing nuclear bombs. He added a whole bunch to to the whole structure And then even recently now there's been a whole bunch more research being done And this is where the behavioral economics comes in it can be a little bit difficult because it is a very Theoretical concept and it's not something that we necessarily see in reality Then like I said, there is a little bit of the ruin theory the runoff triangles But the bulk of the course is dealing still worth Assets assets and market risk and those type of things so capsule asset pricing model mean variance portfolio theory Those are two big chunks. I think the scariest thing in in the syllabus is still stochastic calculus I mean ito's lemur still kind of gives me a little bit of nightmares And that is where you're trying to integrate those jagged, you know teeth line You know the stock exchange is to try and see what is the area and need those curves in order to calculate various risks and do Stochastic projections and stuff like that. That is difficult I'm not gonna like that is that is quite difficult and then the final section is on option pricing and derivatives and For some people it just clicks. They find this the beauty in the mathematics and it's quite happy other students do kind of struggle with these Instruments that are deriving their value from another asset and like what's going on and then there's put options and then there's Different types of spreads and strategies that you can do and volatility smiles and it does it does escalate quite quite quickly But it is still something that I think is is manageable stochastic calculus is probably the hardest part of the course But the one thing that I tell my students and also want to tell you guys is especially with the subject like financial Economics, it's so important to understand the place of the subject in the real world Especially when it's so conceptual and there are these big differences So the one thing I recommend is to is to read books and that's I've actually got I've got a bunch of books over here That I just want to show you guys that I've been reading that helped me a lot with this exam This is one of the hardest actual exams So it might be worth reading a bunch of textbooks and other Nonfiction written by people who've won Nobel Prizes in economics to just try to get a another perspective So the first book I've got you it's called it's called animal spirits Okay, and it's how human psychology drives the economy and why it matters for global capitalism And it's weird the reason why I bought this book is because this guy Robert J. Schiller From Yale University. I mean you can get all of their lectures from Yale University on iTunes University For free so you can go and that's what I did. I got I think it was like 10 hours worth of these lectures Talking about stock markets. I would listen to it while I was in in the traffic going to vits back in my first year and So I thought you know what I need to get this guy's book and just read about how stories kind of drive the stock market price And I was quite cool 2013. He won the Nobel Prize in economics for his work So definitely a good book worth reading What was interesting is Schiller was very good friends with another guy called Jeremy Siegel and he kind of spoke a lot about him in his lectures so I was like well, okay, let me let me get his book as well and His book is called the future for investors and why the tried and the true triumph over the bold and the new and It's kind of why He's also author of a book called stocks for the long run and he kind of talks about why stocks are better than Bonds and this is interesting because there's literally a part in the syllabus I think it's section 1.33 that says explain the equity premium puzzle Which is why have stocks done so much better than bonds and You can you know, you cannot read you can read an entire book for what syllabus objective to get a nice nice overview Then I've got I mean this book is more for Enterprise risk management. So not the entire textbook is is appropriate But there is some stuff here on market risk and it talks a lot about some of the credit models and stochastic interest rates and all these things So if you want a more technical detailed look and you're not happy with the notes that you've been provided at university This book is worth worth getting Also, it's gonna help you a lot when it comes to enterprise risk management if you ever gonna do that specialist subject Also an enterprise risk management. I mean This book it's it's a very very easy read and it's something I think all all Actories should read this book because it just kind of outlines risk management I mean in a way actuarial science and risk management. We are very closely linked So it's worth reading and seeing how businesses apply some of the incentives and controls To try and manage this thing that us actually have dedicated our lives towards Then this was kind of the book that got me got me really interested in finance I read this when I was when I still back at school. It's called the new buffett ology So it's basically now it's not old buffett ology But it was yeah the proven techniques for investing successfully in changing markets that have made Warren Buffett the most famous Investor and then I remember like the first page was a disclaimer like you could lose all your money And I was like cool But you're quite a nice book to get started with financial markets. You start learning a little bit about the basics It's weird. I kind of disagree with everything in this book now after after doing my fellowship in finance I think passive investing is the way to go and that active investing might have worked for Buffett in like the 70s and the 80s But but y'all that time's over but still worth a book worthy to to read and then I mean this is Subjects will like I said used to be called financial economics So it might be worth brushing up especially if you haven't done economics in a long time It's just getting like a general book on economics and just you know, you know Just refreshing the mind on what is micro what is macro? And some of these things like what does quantitative easing due to the market and various other currency manipulations and and those kind of things so This is this is again It's probably a good book for all all actors to read and then there are a few others that I can't find I don't know where I've put them in my room. They're probably under a pillow or something like that the one is called predictable irrationality and That is also grateful behavioral economics It kind of shows that all the assumptions that people are rational investors Kind of doesn't really work out in reality and it's an interesting studies that they did in some of the experiments So a really fun read there and then of course with the subject probably the best textbook that you can get It's I think is a John C. Hull. I just know these names are Hull I remember it sounded very similar to hell and I was like, you know This subject is a little bit of hell without this textbook So John C. Hull's textbook on I think it's called Option pricing and derivative trading or or something like that But it's a really really good book to read and especially to use to study when it comes to Specifically the CM2 exam, which is the new CT8 So if you're doing financial economics, I highly highly highly recommend that textbook What I'm gonna do is I'm gonna put a link In the description below so that you can get all of these books I think they're all available on Amazon. I'll find the links. I'll post those below And then like I said, they also put a link to the Udemy course So for people who are studying that subject and you want extra help with the excel component I've made a whole bunch of dedicated videos Just to that and I want to put on the youtube because then I'm kind of like, you know Everyone will be like, oh another excel video I might I might put one or two new ones because I need to keep updating that course Of course new exams are being written. So I might make one on like stochastic dominance and how to do that in excel And upload this onto the channel. So if you haven't make sure you subscribe Hit that like button and let me know your thoughts in the comment section But y'all go check out these books in the description and study hard. Thanks for watching. Cheers