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FRM Curriculum- November 2016 Exam

FRM Curriculum- November 2016 Exam

FRM Curriculum- November 2016 Exam:- The FRM syllabus is updated each year by the GARP committee, and consists of learning objectives relevant to both Parts 1 and 2 of the FRM exam. Each part of the syllabus consists of topics and readings. Part 1 includes four topics and Part 2 includes five topics.



FRM Curriculum

Each reading in the FRM syllabus includes learning objectives, which provide an overview of the content that will be tested in the FRM exam. These learning objectives outline specific areas of each reading in the syllabus. Although there are many new readings and learning objectives added to the syllabus each year, there are also some that remain the same or are removed. GARP releases the new FRM syllabus annually around the end of December.

FRM Curriculum- Part 1

FRM Syllabus covers the fundamental tools and techniques used in risk management and the theories that underlie their use. Specific areas of coverage and their weighting in the Syllabus for FRM Part 1 are:

1. Foundations of Risk Management (20%)

This area focuses on a candidate’s knowledge of foundational concepts of risk management and how risk management can add value to an organization and includes:

  • 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

2. Quantitative Analysis (20%)

This area tests a candidate’s knowledge of basic probability and statistics, regression and time series analysis, and various quantitative techniques useful in risk management such as:

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

3. Financial Markets and Products (30%)

This area tests the candidate’s knowledge of financial products and the markets in which they trade, including:

  • 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

4. Valuation and Risk Models (30%)

This area of FRM Pa will test a candidate’s knowledge of valuation techniques and risk models. This includes:

  • 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

FRM Curriculum- Part 2

Part II of the FRM Exam further applies the tools and techniques covered in Part I and delves more deeply into major sub-areas of risk management. Specific areas of coverage include:

1. Market Risk Management (25%)

This section tests a candidate’s knowledge of market risk measurement and management techniques. These include:

  • 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

2. Credit Risk Management (25%)

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 counter party risk is also tested, as well as default risk and methodologies used to measure it, such as Credit VaR.

3. Operational and Integrated Risk Management (25%)

This section of FRM Part 2 November syllabus addresses a candidate’s knowledge of two areas of increasing importance for many firms—operational risk management and integrated risk management. This includes:

  • 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 modelling and IT infrastructure, stress testing, and risk appetite
  • Importantly, this section also tests a candidate’s knowledge of key regulations and the major international regulatory frameworks relevant to risk managers today, such as Basel

4.Risk Management and Investment Risk Management (15%)

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.

5. Current Issues in Financial Markets (10%)

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

Best Recommended Read:- Complete Details of FRM Syllabus and Subjects

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FRM Curriculum



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