Financial Risk Management

FRM® (Financial Risk Manager) Exam Preparation Courses


For the November 2015 FRM exams we are offering the following course options:

  • weekday evening classes for the FRM Exam Part I from August to October 2015
  • four-day intensive review class for the FRM Exam Part I in October 2015

FRM Exam Part II will be offered in March 2016 for May 2016 Exams

The courses are open to anyone who wants to take the exams but are also open to risk professionals who do not want to take the FRM exam but wish to broaden their knowledge in other areas of risk management.

FRM Program

In the increasingly complex and interdependent world of financial markets and products financial risk management has become essential to a company’s strategy. Often a portfolio manager has a limited understanding of basic fixed income analysis, a quantitative analyst has little feel for daily movements of foreign exchange rates, or a treasurer doesn’t know the relevant accounting rules for derivatives. The Financial Risk Manager (FRM) exam is designed to meet the needs of risk professionals and to allow them to make better decisions for their company and its investors.


The FRM Exam is organized by GARP (Global Association of Risk Professionals). In 2012, the FRM Exams Part I and Part II will be offered on 19 May and 17 November. Each exam part lasts 4 hours, with a 120 minute break in between. The FRM Exam Part I consists of 100 multiple-choice questions, while the FRM Exam Part II has 80 multiple-choice questions. Candidates can sit for both FRM Exams (Part I and Part II) on the same day.

The exam requires basic analytical skills, general knowledge and intuitive capacity gained through ecperience in capital markets. It is based on the core body of knowledge which contains the following topics:

 FRM Exam Part I

Foundations of Risk Management (Exam Weight: 20%)

Value creation with risk management; Market efficiency, equilibrium and the CAPM; Performance measurement and attribution; Sharpe ratio, information ratio, and tracking error; Factor models and APT; Risk management failures and case studies; Ethics

Quantitative Analysis (Exam Weight: 20%)

Probability distributions; Estimating parameters of distributions; Linear regression and correlation, hypothesis testing; Statistical inference; EWMA, GARCH models; Maximum likelihood methods; Volatility term structures; Simulation methods

Financial Markets and Products (Exam Weight: 30%)

Mechanics of futures markets; Hedging strategies using futures (minimum variance hedge ratio); Determination of forward and futures prices; Interest rate futures; Swaps; Properties of stock options; Trading strategies involving options; Commodity forwards and futures (cost of carry, lease rate, convenience risk, basis risk, exchanges and strategies); Foreign exchange risk; Corporoate bonds; Measuring portfolio exposure

Valuation and Risk Models (Exam Weight: 30%)

Value at risk (delta-normal valuation, full revaluation, historical simulation, and Monte Carlo simulation methods); Applications of VaR for market, credit, and operational risk; VaR of linear and non-linear derivatives; VaR for fixed income securities with embedded options; Structured Monte Carlo; Stress testing and scenario analysis; Term structure of interest rates; Discount factors, arbitrage, and yield curves; Bond prices, spot rates, and forward rates; Dollar value of a basis point, duration, and convexity; Duration based hedging; Binomial trees and Black-Scholes-Merton model; Option greeks; Credit rating agencies, credit ratings; Credit transition matrices; Sovereign risk and country risk evaluation

FRM Exam Part II

Market Risk Measurement and Management (Exam Weight: 25%)

Volatility smiles and volatility term structures; Exotic options; Duration, convexity, key rate and bucket exposures, and term structure models; Backtesting value at risk; Mapping financial instruments to risk factors; Expected shortfall and coherent risk measures; Parametric approaches: extreme value theory; Modeling dependence: correlations and copulas; Mortgages and mortgage-backed securities (underwriting mortgages, prepayment models, risk and valuation of mortgage-backed securities)

Credit Risk Measurement and Management (Exam Weight: 25%)

Subprime mortgages and securitization; Credit derivatives, credit default swaps, and credit-linked notes; Cash and synthetic collateralized debt obligations (pricing and risk management); Probability of default, loss given default, and recovery rates; Credit scoring and credit spreads; Expected and unexpected loss; Contingent claim approach and the KMV model; Default and default-time correlations; Portfolio credit risk; Credit risk management models; Risk mitigation techniques

Operational and Integrated Risk Management (Exam Weight: 25%)

Risk capital and allocation of risk capital across the firm; Firm-wide risk measurement and management; Evaluating the performance of risk management systems; Regulation and the Basel II Accord (minimum capital requirements, credit concentration risk, liquidity risk, stress testing); Implementation and model risk; Liquidity risk; Economic capital and risk aggreggation

Risk Management and Investment Management (Exam Weight: 15%)

Portfolio construction; Risk decomposition and performance attribution; Individual hedge fund strategies (return and risk considerations for fixed-income arbitrage, merger arbitrage, convertible bond arbitrage, equity long/short, equity market-neutral, macro, distressed debt, emerging markets); Hedge fund risk management (asset illiquidity, valuation, and risk measurement); Use of leverage and derivatives and the risks they create; Funds of hedge funds and style drifts; Portfolio risk: analytical methods; Value at risk and risk budgeting in investment management; Risk budgeting for pension funds and investment managers using value at risk

Current Issues in Financial Markets (Exam Weight: 10%)

Causes and consequences of the current crisis; Subprime mortgage design; Mortgages and securitization, supbrime CDOs; Liquidity crisis; Use and limitations of value at risk; Hedge funds and systematic risk

More information about GARP and the FRM exam can be found at

If you want further information about the prep courses offered by AIMF please complete the form below or call us at 22274470

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