FRM Syllabus Part 1 and Part 2

The Financial Risk Management (FRM) certification is a prestigious qualification for specialists searching for a career in risk management. It’s provided by the Global Association of Risk Professionals (GARP) and is exceptionally recognised in the finance industry.

To achieve the FRM certification, you need a stable knowledge of the FRM syllabus, which is divided into two parts. In this blog, we’ll discover the FRM syllabus, the topics included in every component, the subjects you will come across, and the things you need to do to ace the exams.

Strategic Preparation Tips for Mastering the Official FRM Syllabus

Enrolling in specialised professional programs right after graduation helps you gain practical industry skills and secures a competitive edge while applying for lucrative roles in the global corporate job market.

• Detailed FRM Syllabus Part One: The first part of the curriculum focuses on foundational risk management tools, including quantitative analysis and the fundamental concepts of various global financial markets today. 
• Key Topics in FRM Syllabus: Candidates must master the essential areas of valuation and risk models while learning how to use complex mathematical tools for measuring different financial market risks. 
• Advanced FRM Syllabus Part Two: This second level of the program dives deep into the practical application of market risk and operational risk management within the international banking system today. 
• Focus Areas of FRM Syllabus: Students will explore investment management and the latest trends in financial markets to understand how global institutions handle high levels of liquidity and credit risk. 
• Exam Weightage in FRM Syllabus: Each section of the examination carries a specific weightage that determines how much time a student should spend on individual topics to ensure maximum scoring potential. 
• Study Resources for FRM Syllabus: Using high-quality prep materials and practice questions is the best way to cover the vast curriculum while improving your speed and accuracy for the final test.

FRM Syllabus: 

Foundation: This subject introduces you to the fundamental standards and concepts of risk control. It covers topics like risk type, size, and regulatory frameworks.

Quantitative Analysis: Quantitative analysis is a crucial thing in risk control. This topic requires a statistical approach, the theory of opportunity, and arithmetic economics.

Monetary Markets and Goods: To handle threats effectively, you need to know the financial markets and various financial products that are traded within them. This scenario involves markets, derivatives, and structured goods.

Valuation: Valuation is important for assessing risk. In this subject, you will find out about valuation strategies, risk types, and the mathematics behind them.

Marketplace: Marketplace risk is a vast subject for monetary institutions. This subject covers marketplace risk size methodologies, together with cost at risk (VaR).

Credit Risk: Credit risk involves determining the likelihood of borrowers failing to meet their obligations. This issue dives into credit risk, credit derivatives, and credit portfolio management.

FRM Syllabus: Part 1

Foundations of Risk Management:

Risk Management Process: An overview of how risk is identified, measured, monitored, and controlled within an organisation.

Types of Risk: It deals with the various risk types, viz., market risks, credit risk, operational risks, and liquidity risks.

Risk Governance: The risk management techniques within any organisation are concerned with regulatory aspects and ethical points.

Case Studies: Practical application of risk management concepts in real case studies.

Quantitative Analysis

Probability Theory: Knowing basic probability concepts and also probability distribution.

Statistical Concepts: Basic Sampling, Hypothesis Testing, etc.

Time Series Analysis: Studying financial data that has been spread across time; this includes ARIMA, moving average models, and other things.

Correlation and Covariance: Finds the relationship between variables, including portfolio risk.

Financial Markets and Products:

Overview of Financial Markets: An introduction to students regarding the several types of financial markets, including equity markets, fixed income markets, or even a derivatives market.

Types of Financial Instruments: Different types of stocks, bonds, options, and futures.

Market Participants: Market participants include types of investors, issuers, and intermediaries.

Market Structures: Investigating the design and structure of financial markets and the implications for trading and pricing.

Valuation and Risk Models:

Valuation Techniques: Valuation methods of financial assets and derivatives, which may include the use of discounted cash flow models or option pricing models.

Risk Measures: Value at risk (VaR), expected shortfall, and stress testing, among other measures used to express risk in numerical terms.

Risk Models: Building and using risk models to assess portfolio risk, including historical simulation and Monte Carlo simulation.

Credit Risk Models: Introduction to credit risk modelling and credit scoring.

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FRM Syllabus: Part 2

Market Risk Measurement and Management:

Value at Risk (VaR): A detailed study of parametric and historical simulation, as well as the Monte Carlo simulations and approaches to VaR models.

Stress Testing: Techniques for understanding portfolio risk behaviour under extreme stress conditions.

Fixed Income Portfolio Management: Strategies associated with managing risk in fixed-income portfolios, including rate of interest risks and credit risk.

Market Models: Advanced methods of market models and their usages.

Credit Risk Measurement and Management:

Credit Risk Models: Details of credit risk models, including both structural models and reduced-form models.

Credit Derivatives: Credit default swaps (CDS) and other types of credit derivatives.

Credit Portfolio Management: The management of credit risk in a portfolio.

Counterparty Risk: Risk assessment of counterparties in over-the-counter (OTC) transactions.

Operational and Integrated Risk Management:

Operational Risk Frameworks: Developments of the operational risk framework and risk assessments.

Risk Governance and Culture: An investigation of the function of risk culture and governance in managing operational risks.

Business Continuity and Disaster Recovery: Strategies for ensuring business continuity in the face of operational disruptions.

Integrated Risk Management: Approaches for integrating various risk types, including market, credit, and operational risk.

Risk Management and Investment Management:

Alternative Investments: Overview of alternative asset classes such as private equity, hedge funds, and real estate and associated risks.

Risk Management for Investment Portfolios: Techniques for managing investment portfolio risk, including asset allocation and risk-adjusted performance measurement.

Investment Risk Management Case Studies: Practical case studies of challenges in investment management risk management.

Current Issues in Risk Management: Emerging trends and issues in risk management.

FRM Study Material:

FRM Curriculum: Go through the official curriculum by the Global Association of Risk Professionals (GARP). For Part 1 and Part 2, the study material is comprehensive in that it has textbooks for both exams. The books are divided into all topics that must be covered for each exam.

FRM Study Guides: Various study guides and textbooks are published just for the FRM exams by different publishers. The guides frequently provide summaries, practice questions, and sample exams to help a candidate prepare better.

Online Courses: There are numerous online courses that educational sites provide for preparation of the FRM exam. The typical course usually provides video lectures, practice exams, and study plans, which ease the learning process and reviewing.

Practice Exams: Mock exams are important to evaluate your preparedness for the actual FRM exams. Official GARP practice exams and practice exams from other credible sources are available.

Calculators of Finance: A financial calculator, HP 12C or TI BA II Plus, would be necessary to compute on the test day. The effective usage of those calculators would need to be familiarised beforehand.

How Zell Education will help you:

Gaining the FRM certification is a significant milestone in the professional path of a person aspiring to be a risk management expert. At Zell Education, you will be getting not only expert guidance but also membership in the unique community of FRM practitioners. 

We guarantee that the materials provided to you will comprise interactive modules, real-life case studies, mock tests, and whatever else is necessary to boost your confidence for the examination. Thus, opting for Zell Education will be a gradual process of mastering risk management and attaining your career objectives.

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Conclusion:

Inside the world of finance, managing risk is critical. The FRM certification is a testament to a professional’s information and skills in financial risk control. To be successful in the FRM assessments, it is crucial to understand the intricacies of the syllabus, each in part 1 and component 2. With proper planning and an institute like Zell Education, you will clear FRM easily.

FAQs on FRM Syllabus Part 1 & Part 2

What topics are covered in the FRM Part 1 and Part 2 syllabus?

FRM Part 1 covers foundations of risk management, quantitative analysis, financial markets, and valuation and risk models. Part 2 focuses on applying these skills to credit, market, operational, and liquidity risk.

How is the FRM Part 1 syllabus different from the FRM Part 2 syllabus?

FRM Part 1 focuses on foundational knowledge and valuation methods, while Part 2 applies those concepts to real-world risk types like credit, market, and operational risk.

Can I attempt FRM Part 1 and Part 2 in the same exam cycle?

Yes, you can. However, if you fail Part 1, your Part 2 exam will not be graded, so it’s a significant risk.

How challenging is the FRM Part 2 exam compared to Part 1?

The FRM Part 2 is often considered more challenging due to its application-based questions, even though it has a slightly higher pass rate than Part 1.

What is the recommended gap between FRM Part 1 and Part 2 exams?

GARP, the exam administrator, recommends a gap of at least a few months between FRM Part 1 and Part 2 to allow for sufficient study time.

Is the FRM exam tougher than other finance qualifications like CA or CFA?

It’s subjective, but CA is often considered more difficult due to its lower pass rates, while FRM is more quantitative. CFA is broader but very time-consuming.

What salary can a candidate expect after completing FRM Part 1?

Passing FRM Part 1 can lead to roles like a Risk Analyst with an average starting salary of ₹6-8 lakhs annually in India, or $60k-$80k globally.

Current Role

Co-Founder & CEO at Zell Education

Education

• ACCA – Association of Chartered Certified Accountants, Finance (2011 – 2014)
• Bachelor of Commerce (BCom), Financial Markets from H.R. College Of Commerce & Economics (2010 – 2013)

Location

Mumbai, India

Expertise

ACCA Certified