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.
Looking for an FRM Prep Provider?
Frequently Asked Queries
While Part 1 leans towards a foundational and numerical focus, Part 2 takes a turn by placing a greater emphasis on theoretical aspects. What's intriguing is that, despite the theoretical nature, these aspects in Part 2 are more industry-oriented and practical, offering a unique blend that challenges candidates to apply their theoretical understanding in real-world contexts.Part 2 requires candidates to integrate knowledge from different subjects and apply them in a holistic manner. For instance, questions may necessitate blending concepts from market, credit, and operational risk to provide comprehensive solutions.
MidhaFin's study materials offer a comprehensive and detailed preparation experience tailored to meet the requirements of FRM Part 2. Crafted in alignment with the official GARP curriculum, our material provides a robust foundation for exam success. It highly recommended to use our material as the primary source of preparation.Our learning materials include lecture videos, complete study materials, revision videos, a doubt-solving forum, an interactive student group, a customized study plan, question bank PDFs, past sample paper questions, five mock tests, module-wise tests, and question-solving videos. This inclusive package ensures a thorough understanding and effective preparation for the exam.
The suggested guideline by the MidhaFin team is 600 hours minimum for FRM Part 2 preparation, and candidates may need to adjust their study timelines based on their prior knowledge, learning pace, and personal commitments. It is advisable to start preparation well in advance to allow for a gradual and thorough understanding of the material.
As of 2023, The FRM Part 2 exam is offered thrice a year. Specifically, candidates have the opportunity to take the exam during two one-week exam windows, typically in May and November. And there is a single exam date in August.This schedule allows candidates to plan their preparation and choose a convenient timeframe to sit for the exam. It's important for candidates to be aware of the specific exam dates for each year and plan their study schedule accordingly to ensure optimal readiness for the FRM Part 2 examination.
The customized study plan is a personalized plan that tailors the basic study plan to meet the specific needs of each candidate. This structured plan includes a week-by-week breakdown, module-wise allocation, daily study targets, and utilization of various resources such as study materials, lecture videos, and question banks. The plan emphasizes regular practice, review, and the importance of mock exams to simulate real test conditions. It also provides support through doubt-solving forums and encourages participation in an interactive student group for collaborative learning.The customization is achieved through a dedicated Customized Study Plan (CSP) meeting with our instructor. As soon as candidates enroll in our courses, this meeting ensures that the study plan aligns with their individual learning styles, strengths, and areas that require focused attention. This personalized approach aims to optimize candidates' preparation for the FRM Part 2 exam, enhancing their overall learning experience and chances of success.
As of 2023, The FRM Part 2 exam is offered thrice a year. Specifically, candidates have the opportunity to take the exam during two one-week exam windows, typically in May and November. And there is a single exam date in August.This schedule allows candidates to plan their preparation and choose a convenient timeframe to sit for the exam. Its important for candidates to be aware of the specific exam dates for each year and plan their study schedule accordingly to ensure optimal readiness for the FRM Part 2 examination.