By IIC Lakshya
07 Jul 2024
Others
Before we get into the FRM syllabus, we have to understand who an FRM is. FRM or Financial Risk Manager is a qualified professional who helps a corporation create and implement risk management approaches. FRMs are responsible for assessing, detecting, and managing all financial risks inside a company. The Global Association of Risk Professionals (GARP) provides certification in Financial Risk Manager (FRM).
FRMs frequently encounter scenarios that are unique to the place in which their organization operates, resulting in various risk situations and the opportunity to capitalize on them to increase returns, produce profits, and build value.
The FRM course syllabus covers two levels: FRM Part I and FRM Part II. Here's a brief overview of the structure of each part.
Below are the FRM subjects that are included in the FRM part 1 syllabus:
Valuation: Discusses some of the most fascinating valuation concepts, such as the binomial model and the BSM model. This section provides an overview of Greeks in options and bond valuation.
Risk management: Makes you familiar with concepts such as VAR, Estimated Shortfall, and Stress Testing. This topic is extensively explored in FRM level 2.
The FRM Part 2 syllabus includes the below subjects:
Market Risk is the most active and engaging component of the FRM part II curriculum. The candidate must comprehend VAR and ES calculations using both parametric and non-parametric approaches. Back-testing of these methodologies is extensively described. As a risk manager, you should grasp the impact, attributes, and behavior of correlation in various market scenarios.
The key points covered in Market Risk and Management are:
One of the important parts of FRM Part 1 syllabus, Credit risk, is the most important topic to tackle from an occupational point of view. This section has highlighted all of the Probability of Default modeling options (structural, reduced, factor, and credit scoring models). Counterparty risk, the most common employment in the risk industry, has been widely addressed. Securitization and securitized products have also been considered from a credit risk perspective.
The key points covered in this FRM exam syllabus are:
The FRM course, separated into Parts 1 and 2, includes a wide range of risk management subjects, including quantitative analysis, market risk management, and credit risk assessment. Each component goes deeply into theoretical foundations and practical applications, helping students to successfully address real-world situations. While the FRM tests are noted for their quantitative rigor and require extensive study, the certification leads to significant employment prospects in risk management. Individuals with a love for finance and risk analysis can effectively seek the FRM certification and improve their professional credentials, whether they study on their own or get formal mentoring.
FRM Syllabus: Sections & Topics Covered:
Levels |
FRM Syllabus |
Weightage |
FRM Part 1 |
Quantitative Analysis |
20% |
Valuation & Risk Models |
30% |
|
Financial Markets & Products |
30% |
|
FRM Part 2 |
Credit Risk Management |
25 % |
The FRM test is very quantitative, and the curriculum requires a significant amount of time to learn. FRM Part I is more commonly failed than passed, and only half of those who take the FRM Part II test pass.
Yes, you can study for both the FRM Level 1 and Level 2 tests in 3-4 months, but it will be a rigorous procedure requiring a very disciplined approach.
Certainly, one may only pass FRM exams if they receive coaching. This is for people with an extensive finance understanding and a risk and statistics background. If you are a fresher, it is advised that you get instruction because you need more or a grasp of the principles.
While an MBA is a two-year program that includes internships and tests, completing the FRM-accredited course is more difficult since it involves devotion and hard effort from the participant.