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PRM Curriculum

PRM Curriculum

PRM Curriculum:- Professional Risk Manger (PRM) Exam has become quite popular among the risk professionals and students and competes head-on with the respectable Financial Risk Manager (FRM) Exam from GARP. Even though both the exams certify you as risk managers, the exams are quite different.

prm-curriculum

prm-curriculum

The focus of the PRM exam is to check your real understanding of the subject, rather then to check your memory power. Most of the questions in the exams are targeted at checking your conceptual understanding of the subject. Sometimes the questions may appear very simple, but they will really be checking your true knowledge. Of course, it is important to remember some important formulas, but more important than that is to get your basics right.

Exam I and Exam III are lengthiest as they have more topics. Both these exams will require approximately 150 to 200 hours of study time.

PRM Curriculum

ExamTopicWeighting
IFinance Theory, Financial Instruments and Markets30%
IIMathematical Foundations of Risk  Measurement20%
IIIRisk Management Practices40%
IVCase Studies; Standards: Governance, Best Practices and Ethics10%

PRM Curriculum Exam I— Finance Theory, Financial Instruments and Markets

(Approx. 650 pages of reference material contained in PRM Handbook Volume I 2015 Edition: Books 1, 2 & 3)

Finance Theory                                   

  • Risk and Risk Aversion
  • Portfolio Mathematics
  • Capital Allocation
  • The CAPM and Multifactor Models
  • Basics of Capital Structure
  • The Term Structure of Interest Rates
  • Valuing Forward Contracts
  • Basic Principles of Options Pricing

Financial Instruments                              

(Descriptive and Pricing Knowledge)

  • General Characteristics of Bonds
  • The Analysis of Bonds
  • Futures and Forwards
  • Swaps
  • Vanilla Options
  • Credit Derivatives
  • Caps, Floors and Swaptions

Markets                                              

  • The Structure of Financial Markets
  • Money Markets
  • Bond Markets
  • Foreign Exchange Market
  • Stock Markets
  • Futures Markets
  • The Structure of Commodities Markets
  • Energy Markets

PRM Curriculum Exam II — Mathematical Foundations of Risk Measurement

(Approx. 220 pages of reference material found in PRM Handbook Volume II 2015 Edition)

Foundations

  • Symbols and Rules
  • Sequences and Series
  • Exponents and Logarithms
  • Equations and Inequalities
  • Functions and Graphs

Descriptive Statistics

  • Data?
  • The Moments of a Distribution
  • Measures of Location or Central Tendency
  • Measures of Dispersion
  • Bivariate Data

Calculus

  •  Differential Calculus
  • Higher-Order Derivatives
  • Financial Applications of Second Derivatives
  • Differentiating a Function of More than One Variable
  • Integral Calculus
  • Optimization
  • Linear Mathematics and

Matrix Algebra 

  • Matrix Algebra
  • Application of Matrix Algebra to Portfolio Construction
  • Quadratic Forms
  • Cholesky Decomposition
  • Eigenvalues and Eigenvectors

Probability Theory in Finance 

  • Definitions and Rules
  • Probability Distributions
  • Joint Distributions
  • Specific Probability Distributions

Regression Analysis in Finance

  • Simple Linear Regression
  • Multiple Linear Regression
  • Evaluating the Regression Model
  • Confidence Intervals
  • Hypothesis Testing
  • Prediction
  • Breakdown of OLS Assumptions
  • Random Walks and Mean Reversions
  • Maximum Likelihood Estimation

Numerical Methods

  • Solving (Non-differential) Equations
  • Numerical Optimization
  • Numerical Methods for Valuing Options

PRM Curriculum Exam III — Risk Management Practices

(Approx. 900 pages of reference material contained
in PRM Handbook Volume III: Books 1, 2 & 3)

Risk Management Frameworks

  • Foreword
  • Risk Governance
  • The Risk Management Framework

Operational Risk 

  • Introduction and Overview
  • Risk Assessment
  • Risk Information
  • Risk Modeling
  • Insurance Mitigation

Credit Risk 

  • Classic Credit Products
  • Classic Credit Life Cycle
  • Classic Credit Risk Methodology
  • Credit Derivatives and Securitization
  • Modern Credit Risk Modeling
  • Credit Portfolio Management

Counterparty Risk

  • Basics of Counterparty Risk
  • Risk Mitigation
  • Credit Valuation Adjustment (CVA)
  • CVA Related Aspects — Toward XVA
  • Managing Counterparty Risk and CVA

Market Risk

  • Foreword
  • Market Risk Governance
  • Market Risk Measurement and Management
  • Market Risk in the Trading Book —Business Specific Context
  • Commodities Market Risk Management
  • Market Risk Stress Testing

Asset Liability Management & Liquidity Risk

  • ALM, Liquidity and the Recent Crisis
  • An Introduction to ALM
  • Interest Rate Risk
  • Liquidity Risk
  • Balance Sheet Management

Funds Transfer Pricing

  • Introduction
  • FTP Governance and Management
  • FTP Methods and Historical Development

PRM Curriculum Exam IV — Case Studies and Standards: Governance, Best Practices and Ethics

(Approx. 130 pages of reference material online)

Case Studies

  • Barings
  • NAB-FX Options
  • Bankgesellscaft
  • LTCM
  • Bankers Trust
  • Orange County
  • Metallgesellschaft
  • World Com
  • Northern Rock
  • Taisei Fire and Marine Insurance
  • Fannie Mae/Freddie Mac
  • China Oil
  • Washington Mutual

Standards: Governance

  • Best Practices, Ethics
  • PRMIA Bylaws
  • PRMIA Governance Principles
  • PRMIA Standards of Best Practice,
    Conduct and Ethics
  • Group of Thirty Derivatives Best Practices

PRM Curriculum

prm-curriculum

prm-curriculum

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