Financial Risk Manager (FRM®)

1

Exam Structure – Part I © 2012 – SimpliLearn| All Rights Reserved

Financial Risk Manager (FRM®) is registered trade mark of Global Association of Risk Professionals

Exam Structure

Agenda

FRM PART I 2

Overview of FRM

Program structure

Exam structure

Part I and Part II

Part I Curriculum

SimpliLearn Program Structure

Benefits of FRM certification

Exam Structure

Overview

FRM PART I 3

Part I Exam

• 4 Hours

• 100 MCQ

Part II Exam

• 4 hours

• 80 MCQ

2 years of work experience (Risk-related full-time professional experience)

FRM Certification

The Global Association of Risk

Professionals (GARP) certification - the Financial Risk Manager (FRM®) is the globally recognized standard for those who manage risk.

Financial Risk Manager (FRM®) Registration • Online Registration

(Link : http://www.garp.org/frm/frm-program.aspx )

• No pre-requisite for registration

Exam Structure

FRM Structure

FRM PART I 4

FRM (Twice a year. Third Saturday of May and Nov.)

FRM Part I

Foundations of Risk Management

Quantitative Analysis

Financial Markets and Products

Valuation and Risk Models

FRM Part II Market Risk Management

Credit Risk Management

Operational and Integrated Risk Management

Risk Management and Investment Risk Management

Exam Structure

About FRM Part I Exam

FRM PART I 5

Part I of the FRM Exam covers the fundamental tools and techniques

used in risk management and the theories that underlie their use.

20% 20% 30% 30%

Foundations of

Risk Management

Quantitative

Analysis Financial Markets

and Products

Valuation and

Risk Models

Exam Structure

FRM Part I Syllabus

FRM PART I 6

Financial Markets and Products

Valuation and Risk Models

Foundations of Risk Management

Quantitative Analysis

Exam Structure

FRM Part I Sub-Topics

FRM PART I 7

Fo

un

da

tio

ns

of

Ris

k

Ma

na

ge

me

nt

(20

%)

An understanding of the trade-off between risk and return

The construction of efficient portfolios

Fundamental asset pricing models

Enterprise risk management frameworks

A review of major financial disasters

Applications of the GARP Code of

Qu

an

tita

tiv

e A

na

lysi

s (2

0%

)

Basic probability and statistics

Monte Carlo methods

Volatility forecasting models

Value-at-Risk estimation

Fin

an

cia

l Ma

rke

ts a

nd

P

rod

uc

ts (

30

%)

Equities

Commodities

Currencies

Fixed income

Equity options and other derivatives

A basic understanding of arbitrage arguments related to the valuation

Va

lua

tio

n a

nd

Ris

k M

od

els

(3

0%

)

Basic bond valuation

Valuation using binomial trees

An understanding of the Black-Scholes-Merton model

Value-at-Risk

The contingent claims approach

Expected and unexpected loss estimation

Stress testing

Exam Structure

More About FRM Part I Exam

FRM PART I 8

Study Guide

Duration

Scoring

Calculator

Result

4 hours long

Only GARP-approved calculators allowed

2012 FRM Study guide

2012 FRM AIM Statement

FRM Exam Preparation Handbook

Original Readings Prescribed by FRM

No negative marking

Pass/Fail. Quartile results are provided.

SimpliLearn Study Notes

Exam Structure

Interpreting FRM Part I: AIM Statement

AIMS:

Jorion, Philippe. Value-at-Risk: The New Benchmark for Managing Financial Risk : 3rd Edition (New York: McGraw-Hill, 2007).

Chapter l ................................. The Need for Risk Management

Candidates, after completing this reading, should be able to:

• Define risk and describe some of the major sources of risk.

• Differentiate between business and financial risks and give examples of each.

• Relate significant market events of the past several decades to the growth of the risk management industry.

• Describe the functions and purposes of financial institutions as they relate to financial risk management.

• Define what a derivative contract is and how it differs from a security.

• Define financial risk management.

• Define Value-at-Risk (VaR) and describe how it is used in risk management.

• Describe the advantages and disadvantages of VaR relative to other risk management tools such as stop-loss limits, notional limits, and exposure limits.

• Compare and contrast valuation and risk management, using VaR as an example.

• Define and describe the four major types of financial risks: market, liquidity, credit, and operational; and their forms.

Links to download the desired study materials:

http://www.garp.org/frm/study-center/study-materials.aspx

FRM PART I 9

Exam Structure

About SimpliLearn FRM Part I Tutorial

FRM PART I 10

More than ……hours of E-learning videos 6 sets of question papers in original format

Program Hours

Complete course divided into more than 45 lessons Supporting examples to understand the concept More than 25 supporting Excel spreadsheets

Supporting Material

The program material is continuously updated to keep the modules relevant, intuitive and asp per the latest curriculum and GARP guidelines.

Continuously Updated

Get frequent updates on exam guidelines, difficulty, exam structure, pattern, relevant dates and news.

Updates

E-Learning

Exam Structure

SimpliLearn FRM Part I List of Tutorials

FRM PART I 11

Foundations of Risk Management Quantitative Analysis Financial Markets and Products Valuation and Risk Models

1. The Need for Risk Management 13. Review of Probability 24. introduction - Options, Futures, and Other Derivatives 37. Putting VaR to Work

2. Creating Value with Risk Management 14. Review of Statistics 25. Mechanics of Futures Markets 38. Extending the VaR Approach to Operational Risks

3. Delineating Efficient Portfolios 15. Linear Regression with One Regressor 26. Hedging Strategies Using Futures 39. Binomial Trees

4. The Standard Capital Asset Pricing Model

16. Regression with a Single Regressor: Hypothesis Tests and Confidence Intervals 27. lnterest Rates 40. The Black-Scholes-Merton Model

5. Nonstandard Forms of Capital Asset Pricing Models

17. Linear Regression with Multiple Regressors

28. Determination of Forward and Futures Prices 41. The Greek Letters

6. The Arbitrage Pricing Model APT-A New Approach to Explaining Asset Prices

18. Hypothesis Tests and Confidence Intervals in Multiple Regression 29. Interest Rate Futures

42. Bond Prices, Discount Factors, and Arbitrage

7. Applying the CAPM to Performance Measurement: Single-Index Performance 8. Measurement Indicators 19. Discrete Probability Distributions 30. Swaps

43. Bond Prices, Spot Rates, and Forward Rates

9. Overview of Enterprise Risk Management

20. Continuous Probability Distributions 31. Properties of Stock Options 44. Yield to Maturity

10. Financial Disasters 21. Monte Carlo Methods 32. Trading Strategies Involving Options 45. One-Factor Measures of Price Sensitivity

11. Risk Management Failures: What are They and When Do They Happen

22. Estimating Volatilities and Correlations 33. Commodity Forwards and Futures 46. The Rating Agencies

12. GARP Code of Conduct 23. Quantifying Volatility in VaR Models

34. Fundamentals of Commodity Spot and Futures Markets: Instruments, Exchanges and Strategies 47. Country Risk Models

35. Foreign Exchange Risk 48. External and Internal Ratings

36. Corporate Bonds 49. Loan Portfolios and Expected Loss 50. Unexpected Loss

51. Measures of Financial Risk 52. 0perational Risk 53. Stress Testing 54. Principles for Sound Stress Testing - Practices and Supervision

Exam Structure

Why Should One Go for FRM?

FRM PART I 12

CONFIRM YOUR ACHIEVEMENTS

STAND OUT TO EMPLOYERS

DEVELOP YOUR KNOWLEDGE AND EXPERTISE

JOIN AN ELITE GROUP

DEMONSTRATE YOUR LEADERSHIP

ENHANCE YOUR REPUTATION

Exam Structure

Opportunities for FRM-Certified Professionals

FRM PART I 13

Professionals

Career Changer

Students

Professionals who manage risk, money, or investments and want to broaden their knowledge of the different types of financial risk enter the FRM Program in order to enhance their current skill set.

Enhance your career opportunity and increase scope of your job opportunities by arming yourself with the highly professional and industry-wide recognized certification.

Students with an interest in finance may elect to sit for the FRM Exam during or immediately after completing their studies as a complement to their coursework.

Exam Structure

Insights from FRM 2011 Exam

FRM PART 1 14

FRM candidates came from 129 different

countries

There was a record 26,527 registrations for the FRM Exam

Top 10 countries/regions with the most FRM candidates: China, India, U.S., Hong Kong,

South Korea, Canada, United Kingdom, Singapore, Taiwan, Switzerland

91% of candidates who sat for the November

2011 FRM Exam would recommend that their colleagues also sit for the FRM Exam

Exam Structure

Who is Hiring?

FRM PART I 15

The top 20 companies employing the most Certified FRMs are:

Exam Structure FRM PART I 16

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