How to prepare for FRM

 


An international professional certification offered by the Global Association of Risk Professionals (GARP) designation is the Financial Risk Manager (FRM). The candidate needs to complete two levels of practice-oriented exams which cover mostly topics in finance & risk management and demonstrate 2 years' professional work experience in the same field in order to reach the FRM designation.


FRM Part I

Examination Pattern

FRM Part I is a four-hour long exam (starting 8 AM in the morning) held on the 3rd Saturday of May and November every year. The paper consists of 100 MCQs focusing on tools used to evaluate financial risk: fundamental risk management concepts,  quantitative analysis, financial markets and products, and risk models and valuation.

Preparation Material

'Schweser Notes for FRM Exam' provides sufficient material to clear the FRM exam in a compact way. But, the level of sample questions in Schweser is a little below that of the actual FRM examination. So, after going through the book, one must solve sample practice papers for FRM available on the GARP website. Most of the other sample papers are also available online for FRM exam preparation on websites like  EduPristine and  Bionic turtle.

It is needed to start studying 2-3 months before the exam mainly if you don't have previous knowledge of quantitative analysis &  basic finance. One can excel with one month of study if he/she has a fundamental understanding of financial markets and has taken courses like the Time/Regression series in college. The last 10-15 days should be devoted to practicing the sample papers as there are high chances of minor mistakes given the mathematical nature of the questions.


Passing Marks

There are no fixed passing marks for the FRM exam. Passing scores are decided by the FRM committee and are generally based on relative performance.


Even though FRM does not announce the marks of the candidate, it declares a quartile for each of the four topics. It is generally recommended to be in the top two quartiles (i.e. above 50 %tile) in each subject. Else, scoring the 3rd quartile (i.e. 25-50 %tile) in one subject should be compensated by a 1st quartile (i.e. 75 %tile above) in another. One must jot that this is not the real criteria, but a prediction based on historical results.



In terms of no. of questions, one should correctly solve 70+ questions to smoothly pass the FRM exam. However, students solving around 60 questions (correctly) pass the exam in general. Always recall that FRM does not punish wrong answers. So, it is suggested to make a prediction and do all questions in the paper.


Topic-wise GuideFRM Level I contains four topics with the following weightage:


Fundamental Risk Management Concepts (20% weightage)



The topic verifies the candidate's understanding of the basic concepts of risk management, recent financial disasters and the US credit crisis (2007-08), standard models in finance (like CAPM, Arbitrage pricing, etc.), and GARP's Code of conduct.

Quantitative Analysis (20% weightage)


This topic is totally mathematical covering the concepts of regression, probability, and time series analysis. It should be easy to cover if you have done such courses throughout college.

Financial Markets & Products (30% weightage)This topic deals with the mechanics of derivative products (options, futures, swaps, etc.) and markets. This book requires good understanding & should take the majority of your preparation time. It is recommended to read Options, Futures, and Other Derivatives (a book by John Hull) for a deep understanding of the chapters on this topic.


Valuation & Risk Models (30% weightage)

This topic introduces the aspirant to the use of various risk models and valuation techniques used for pricing options.






BENEFITS OF JOINING FINOMINAL EDUCATION 

The FRM - Financial Risk Management, controlled by the Finominal Education Institute, offers an alumni-level educational plan and assessment program intended to extend your functioning information and down-to-earth abilities connected with investment decision-making This FRM Level 1 Training course (160+ hours of Live classes) provides you with an excellent opportunity to equip exceptionally well for the FRM  exam and pass the exam in your first attempt. To know more call or WhatsApp us at 9650353883.

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