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Financial Risk Manager (FRM)

Financial Risk Manager (FRM)

Financial Risk Manager (FRM) is the world’s most highly respected certification for business professionals in finance who manage risk.

As the financial industry becomes increasingly competitive and concerned about managing risk, it is essential to distinguish yourself and your ability to add value to an organization.

Earning the FRM signals to employers that you are serious about risk management and that you have had your knowledge validated against international professional standards.

By joining the FRM community, you will become part of an elite group of skilled professionals sought after and employed by the leading financial institutions in the world.

YOU WILL LEARN HOW TO

FRM course is a globally recognized professional certification for banking and finance professionals administered by Global Association of Risk Professionals (GARP, USA).

IMPORTANT COURSE INFORMATION

The FRM® Part I and Part II exams are held twice a year, in May and November.  The FRM program is divided into two parts. Both can be sat on the same day in May or November (although we recommend you only sit one part at a time).

The FRM Exams are pencil and paper multiple choice exams.

Part 1

A 100 question multiple choice exam, the FRM Exam Part I focuses on the tools used to assess financial risk: quantitative analysis, fundamental risk management concepts, financial markets and products, and valuation and risk models. Part I is always offered in the morning and must be completed in four hours or less.

Part 2

The FRM Exam Part II is an 80 question multiple choice exam, emphasizing the application of the tools acquired in Part I: market, credit, operational and integrated risk management, investment management as well as current market issues. Part II is always offered in the afternoon and must be completed in four hours or less.

Scoring and Results

There are no penalties for wrong answers. Passing scores are determined by the FRM Committee. Exam results are pass/fail and are emailed approximately six weeks after the exam. Candidates will receive quartile results comparing their performance to other candidates.

COURSE OUTLINE

Modules

Module 1: FRM Part 1 - Foundations of Risk Management

  • An understanding of corporate risk governance and the trade-off between risk and return
  • The construction of efficient portfolios
  • Fundamental asset pricing models
  • Enterprise risk management frameworks
  • Data quality management
  • A review of major financial disasters
  • To emphasize the importance of ethics as a fundamental requirement for sound risk management, applications of the GARP Code of Conduct to professional situations are covered in this section as well

Module 2: FRM Part 1 - Quantitative Analysis

  • Monte Carlo methods
  • Volatility forecasting models
  • Value-at-Risk estimation

Module 3: FRM Part 1 - Financial Markets and Products

  • Futures and forwards
  • Equity options, swaps, and other derivatives
  • Commodities
  • Currencies
  • Corporate bonds and interest rates
  • A basic understanding of arbitrage arguments and hedging related to these financial products

Module 4: FRM Part 1 - Valuation and Risk Models

  • Basic bond valuation and bond hedging
  • Valuation using binomial trees
  • An understanding of the Black-Scholes-Merton model
  • Value-at-Risk (VaR)
  • Expected and unexpected loss estimation
  • Stress testing

Module 5: FRM Part 2 - Market Risk Management

  • Fixed-income interest rate sensitivities
  • Volatility exposures
  • Value-at-Risk (VaR) and back testing VaR
  • Expected shortfall (ES)
  • Correlations and copulas
  • Parametric and non-parametric estimation methods
  • Extreme value theory (EVT)
  • Exotic options and mortgage-backed securities

Module 6: FRM Part 2 - Credit Risk Management

This area focuses on a candidate’s understanding of credit risk management with some focus given to structured finance and credit products such as collateral debt obligations and credit derivatives. Knowledge of counterparty risk is also tested, as well as default risk and methodologies used to measure it, such as Credit VaR.

Module 7: FRM Part 2 - Operational and Integrated Risk Management

  • Coverage of the tools and techniques necessary to measure, manage, and mitigate operational risk
  • Economic capital allocation
  • Enterprise risk management (ERM)
  • Knowledge of critical issues related to liquidity risk management, model risk, loss data modeling and IT infrastructure, stress testing, and risk appetite
  • Importantly, this section also tests a candidate’s knowledge of critical regulations and the major international regulatory frameworks relevant to risk managers today, such as Basel

Module 8: FRM Part 2 - Risk Management and Investment Risk Management

This area focuses on a candidate’s knowledge of risk management techniques applied to the investment management process. Topics such as portfolio construction and performance analysis are covered, as well as risk budgeting and portfolio and component VaR. Issues related to hedge funds and private equity investments are also covered.

Module 9: FRM Part 2 - Current Issues in Financial Markets

The candidate is expected to familiarize him/herself with the readings from this section, approaching each paper critically as a risk manager equipped with the knowledge from the other sections. This area of the Exam will test a candidate’s knowledge of the material covered by each paper. Recent topics have included:

  • Sovereign Risk and Financial Crisis
  • Flash Crash
  • Financial Innovation and Its Issues

 

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