Before you start studying for the exam, it’s helpful to get an overview of what it entails. This will help you feel more confident about whether or not the certification will be valuable to you.
In this article, we’ll discuss the FRM Part 1 syllabus, fees, and exam format. We’ll also explore any potential job prospects after passing Part 1, which might surprise you!
SYLLABUS Of FRM Exam
If you have a general idea of what’s covered in Part 1, it can help you understand how each chapter fits into the bigger picture. This will make it easier to see how everything is connected and prevent you from asking “Why do I need to study this?” during your preparation.
The part of 1 exam consists of 4 subjects namely:
| Subject | Weightage |
| Foundations of Risk Management | 20% |
| Quantitative Analysis | 20% |
| Financial Markets and Products | 30% |
| Valuation and Risk Models | 30% |
1. Foundations of Risk Management
- This section covers a lot of ground! It starts by explaining what risk is and the different types of risks organizations face. You’ll learn about different ways to measure and manage risks, including how banks and financial institutions handle these risks.
- The section also talks about credit risk, which is the risk that the other party in a contract won’t fulfill their obligations. You’ll learn about credit derivatives and how they played a role in the 2007-09 global financial crisis.
- Another important topic is portfolio theory, which explains how risk-averse investors aim to maximize their returns while minimizing risk. The section also covers past financial disasters and how to prevent them from happening again in the future
- Finally, you’ll learn about the institute’s code of conduct that members must follow. While the section is mainly theoretical, the exam questions will require you to apply what you’ve learned, such as analyzing case studies
2. Quantitative Analysis
- This subject covers a lot of important concepts! It starts by explaining the “Time Value of Money,” which means that the value of a dollar today is different from the value of a dollar in the future.
- The subject also covers probability, which is important for risk management. You’ll learn about basic statistics and how to analyze data to make decisions about the future. You’ll also learn about different types of distributions and how to test hypotheses.
- Another important topic is regression, which helps predict the value of one variable based on other variables. For example, you might use regression to predict a company’s sales based on its advertising spending. This technique helps build relationships between dependent variables and put them into mathematical equations.
- The subject also covers time-series analysis, which involves forecasting data based on shifts in time period. Finally, you’ll learn about volatility and correlations between different asset classes, which is crucial for managing risk in a company.
3. Financial Markets & Products
- This subject covers different types of financial institutions, like commercial banks, investment banks, insurance companies, hedge funds, and mutual funds. The focus is on derivatives, which are financial products that get their value from something else.
- This section explains forwards, futures, options, and swaps in detail and how they help manage risks. Options are discussed more in the fourth book.
- Another important part of this subject is fixed income products, like bonds and Mortgage Backed Securities (MBS). This book goes into detail about these topics too.
4. Valuation & Risk Models
- This subject talks about a measure used by banks called VaR (Value at Risk) to measure the amount of potential losses. It explains how to calculate this measure and how it can help in risk management. It also covers rating agencies and how they assign ratings to companies based on their creditworthiness.
- The subject discusses risks at a country level based on macroeconomic trends, as well as credit risk and operational risk. A major part of this subject is focused on fixed income products, such as bonds and Mortgage Backed Securities (MBS), and how their prices are affected by interest rates.
- In addition, the subject includes readings on options valuation using mathematical models and the different factors that affect the value of options.
FEES
If you have already paid the one-time enrollment fee of $400, then the fee for taking the Part 1 exam is:
| Early | $425 |
| Standard | $550 |
| Late | $725 |
EXAM PATTERN
- The first part of the FRM exam has 100 Multiple Choice Questions (MCQs) and lasts for 4 hours. Candidates have around 2.4 minutes to answer each question.
- The questions vary in difficulty, with some requiring simple formula application, while others involve real-life scenarios.
- Generally, the theoretical chapters tend to have more complex questions. To do well, it’s important to focus on understanding the concepts in all the chapters.
- The pass rate for this exam is around 40%.
SALARIES & JOBS
Clearing the Part 1 exam alone may not be enough to secure a job in Risk Management as it serves as the foundation for the specialized risk management syllabus in Part 2. It is recommended to clear both exams to be eligible for most risk management positions.
FAQ
Q. What is the FRM exam?
The FRM (Financial Risk Manager) exam is a globally recognized professional certification program for risk management professionals. It is designed to test the knowledge and skills required to identify, evaluate, and manage various types of financial risks in today’s dynamic financial landscape.
Q. What are the eligibility criteria for the FRM exam?
There are no specific eligibility criteria for the FRM exam. Anyone can take the exam. However, to become a certified FRM, a candidate must have a minimum of two years of work experience in the field of risk management or a related field.
Q. How many levels are there in the FRM exam?
The FRM exam consists of two levels: Part 1 and Part 2. Both exams must be passed to become a certified FRM.
Q. What is the exam format for the FRM exam?
Both Part 1 and Part 2 of the FRM exam consist of 100 multiple-choice questions (MCQs) each. The duration of each exam is four hours.
Q. What is the syllabus for the FRM exam?
The FRM exam syllabus covers a range of topics related to risk management, including quantitative analysis, financial markets and products, valuation and risk models, and risk management and control.
Q. How long does it take to prepare for the FRM exam?
The amount of time required to prepare for the FRM exam varies depending on the individual’s background and experience. However, on average, most candidates require at least six months of dedicated study time to prepare for each exam.
Q. What study materials are available for the FRM exam?
There are many study materials available for the FRM exam, including study guides, practice exams, and online courses. The official study materials are provided by the Global Association of Risk Professionals (GARP), the organization that administers the exam.
Q. What is the passing score for the FRM exam?
The passing score for the FRM exam is determined by GARP and is not publicly disclosed.
Q. How often is the FRM exam offered?
The FRM exam is offered twice a year, in May and november
Conclusion
In conclusion, the FRM Exam Syllabus is a comprehensive and rigorous program that covers a wide range of topics related to risk management. The program consists of two parts, each of which focuses on different areas of risk management.
Part 1 covers foundational topics such as quantitative analysis, financial markets and products, valuation and risk models, and risk management tools and techniques. Part 2 delves deeper into more specialized areas such as market risk, credit risk, operational risk, and risk management in investment management.
Aspirants should note that passing the FRM Exam requires a significant amount of dedication, study, and practice. However, the knowledge and skills gained through the program are highly valued in the finance industry and can lead to rewarding career opportunities.
Overall, the FRM Exam Syllabus provides a solid foundation for professionals seeking to build a career in risk management, and with the right preparation and dedication, aspirants can succeed in passing both parts of the exam and earning the FRM certification.