Financial Risk Management
FRM Part - 2
Courses Offered
By : Micky Midha
FREE
FREE
12 Hrs of Videos
Available On Web,IOS & Android
Access Until You Pass
Lecture PDFs
class notes
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By : Micky Midha
250+ Hrs Of Videos
Available On Web,IOS & Android
Access Until You Pass
Complete Study Material
Quizzes,Question Bank & Mock tests
VIEW DETAILS
By : Micky Midha
450+ Hrs Of Videos
Available On Web,IOS & Android
Access Until You Pass
Complete Study Material
Quizzes,Question Bank & Mock tests
VIEW DETAILS
Eligibility and/or Pre-Requisites
In order for your Part 2 examination to be evaluated, you must successfully complete FRM Part 1.
Eligibility and/or Pre-Requisites
In order for your Part 2 examination to be evaluated, you must successfully complete FRM Part 1.
About the Exam - FRM Part 2
FRM Part 2 is the second level of the Financial Risk Manager (FRM) examination, offered by the Global Association of Risk Professionals (GARP). This segment of the FRM certification delves into practical applications of the knowledge acquired in FRM Part 1. It offers a more in-depth exploration of key areas, including market risk, credit risk, operational, liquidity risk, risk management in investment, and a study of current issues in the financial markets.
There are portions which primarily focus on applying the knowledge and concepts acquired in Part 1, and hence it is assumed that candidates already possess a foundational understanding of the concepts covered in Part 1. But there are certain areas of Part 2 that introduce entirely new or more advanced concepts that candidates may not have encountered in Part 1. This signifies that Part 2 combines both the application of existing knowledge from Part 1 and the introduction of fresh, potentially challenging material.
About the Exam - FRM Part 2
FRM Part 2 is the second level of the Financial Risk Manager (FRM) examination, offered by the Global Association of Risk Professionals (GARP). This segment of the FRM certification delves into practical applications of the knowledge acquired in FRM Part 1. It offers a more in-depth exploration of key areas, including market risk, credit risk, operational, liquidity risk, risk management in investment, and a study of current issues in the financial markets.
There are portions which primarily focus on applying the knowledge and concepts acquired in Part 1, and hence it is assumed that candidates already possess a foundational understanding of the concepts covered in Part 1. But there are certain areas of Part 2 that introduce entirely new or more advanced concepts that candidates may not have encountered in Part 1. This signifies that Part 2 combines both the application of existing knowledge from Part 1 and the introduction of fresh, potentially challenging material.
FRM prep resources
FRM Part 2 is composed of six modules
Each with its respective weighting as follows:
20%
Market Risk Measurement (MR)
20%
Credit Risk Measurement and Management (CR)
20%
Operational Risk and Resiliency (OR)
15%
Liquidity Risk Measurement (LR)
15%
Risk Management and Investment Management (RM)
10%
Current Issues in Financial Markets (CI)
Market Risk Measurement
and Management
This module builds upon the FRM Part 1 curriculum and delves into the challenging realm of market risk. It covers various topics, including VaR and other risk metrics, estimation methods like parametric and non-parametric approaches, VaR mapping, backtesting VaR, coherent risk measures like expected shortfall (ES), Extreme Value Theory (EVT), modeling dependence through correlations and copulas, term structure models of interest rates, volatility with considerations for smiles and term structures, and the Fundamental Review of the Trading Book (FRTB).
Credit Risk Measurement
and Management
This module is dedicated to assessing and managing the risk of default by borrowers or counterparties. It explores advanced techniques and models such as credit rating methodologies, credit derivatives, and credit portfolio management. Key areas of focus include credit analysis, quantitative methods for assessing default risk, expected and unexpected loss, Credit VaR, counterparty risk, credit derivatives, and structured finance and securitization.
Operational Risk and
Resilience
This module attempts to provide a detailed overview of various financial instruments including derivatives, securities, and structured products. The module aims to provide a sound understanding of different types of financial assets such as fixed-income securities, money market instruments, FX products, commodities, derivatives (F&O and swaps, etc), and alternative investments such as CDOs, CLOs, ABS, etc. and introduces the concept of hedging as an important tool of risk management.
Liquidity & Treasury Risk Measurement & Management
This module equips financial institutions with tools to recognize, quantify, and manage liquidity risks. It emphasizes maintaining adequate liquidity levels, implementing effective funding strategies, and aligning with regulatory guidelines. Topics include liquidity risk principles and metrics, liquidity portfolio management, cash-flow modeling, liquidity stress testing, contingency funding plans, funding models, funds transfer pricing, cross-currency funding, balance sheet management, and asset liquidity.
Risk Management and Investment Management
This module revisits some content from FRM Part 1 and introduces additional conceptual, numerical, and theoretical chapters. It explores applying risk management techniques to the investment management process, covering factor theory, portfolio construction, risk metrics, risk budgeting, monitoring and performance measurement, portfolio-based performance analysis, and hedge funds.
Current Issues in
Financial Markets
This module focuses on significant topics with a substantial impact on financial markets. It includes machine learning (ML) and artificial intelligence (AI), climate risk, inflation risk, and emerging technologies like blockchain, cryptocurrency, and decentralized finance.
Composition and Exam Structure
FRM Part 2 consists of 80 questions, all with equal weighting. These questions are presented in a multiple-choice format, where you choose the correct answer from a set of options. The exam is conducted in a computer-based format (CBT), providing a modern and efficient testing experience. Candidates are granted a four-hour window to complete the examination, during which they navigate through the questions and select their responses. This format aims to assess candidates’ knowledge, application, and decision-making skills within the defined time constraints.
Composition and Exam Structure
FRM Part 2 consists of 80 questions, all with equal weighting. These questions are presented in a multiple-choice format, where you choose the correct answer from a set of options. The exam is conducted in a computer-based format (CBT), providing a modern and efficient testing experience. Candidates are granted a four-hour window to complete the examination, during which they navigate through the questions and select their responses. This format aims to assess candidates’ knowledge, application, and decision-making skills within the defined time constraints.
Study Plan
This study plan provides a 20-week road map with relevant chapters that should be covered every week.
Preparation Tips
Preparing for FRM Part 2 requires careful consideration and effective management of various key issues:
1. Theoretical Nature:
Unlike Part 1, FRM Part 2 places a strong emphasis on theoretical concepts, necessitating an in-depth understanding of risk management models, frameworks, and methodologies. This theoretical nature can pose challenges, as candidates need to dedicate substantial effort to comprehend and memorize complex concepts.
2. Vast Syllabus
The breadth of the syllabus in FRM Part 2 is considerable, with over 100 chapters spread across its six modules. This extensive coverage can be overwhelming for candidates, demanding comprehensive preparation across all subjects. To succeed, candidates must be prepared to cover a wide range of topics.
3. Application-Oriented:
Despite its theoretical underpinning, FRM Part 2 is highly application-oriented. The exam assesses candidates’ ability to apply risk management principles in real-world scenarios. Bridging the gap between theory and practice can be challenging, as candidates need to demonstrate their capacity to use risk management concepts effectively.
4. Integration of Concepts:
FRM Part 2 requires candidates to integrate knowledge from various subjects and employ them to solve multifaceted risk management problems. This integration of concepts is crucial, as questions may require blending knowledge from modules covering Market, Credit, and Operational Risk. Candidates must understand how different risk factors interact and influence decision-making to provide comprehensive solutions.
5. Depth of Knowledge:
Part 2 delves deeper into the concepts introduced in Part 1. To navigate the heightened complexity of Part 2, candidates must have a strong foundation in the concepts from Part 1. A deep understanding is crucial, particularly for those who may have gaps in their grasp of Part 1 material.
6. Time Management:
FRM Part 2 is a comprehensive exam that assesses candidates across multiple subjects. Effective time management during the exam is paramount to ensure all questions are answered within the allocated timeframe. Candidates need to develop strategies to allocate their time wisely across the various sections of the exam to maximize their chances of success.
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