The exam for the FRM certification (Financial Risk Manager) takes place twice a year in May and November. It has two parts and you can take the exam for each part either separately or both on the same day.
According to GARP it takes somewhere between 200 and 400 hours of reading to prepare each part. So obviously you have to spread it out over a few months to make it digestible.
Topics
This is Part 1 in a nutshell:
- Foundations of risk management: some generalities about risk + CAPM in great detail
- Quantitative Analysis: probabilities, distributions, statistics, lots of regression, Monte Carlo methods
- Financial Markets and Products: futures, swaps, options, bonds... Lots of chapters from the Hull book.
- Valuation and Risk Models: this is where it gets interesting. VAR calculation, binomial trees, Black Sholes, Greeks, hedging, risk metrics...
- The official material is an aggregation of chapters extracted from a variety of finance books. The FRM study doesn't rely on one single manual. This makes the reading more interesting because you navigate through publications written by different authors with different specialties. The FRM study guide gives the full list of books and chapters to read. Another guide called "AIM statements"gives the same list plus a highlight of what you're expected to take away from each chapter.
- Obviously having all readings in one place is much more convenient so you can buy the 4 books from GARP for $250 + shipping. This is what I did when coming back to London to prepare for the last 2-week cram.
- There is also a book called Financial Risk Manager Handbook
written by Philippe Jorion and available in Kindle format. It's a complete textbook covering FRM Part 1 and Part 2 and broadly addressing the same topics as the 2013 GARP's study guide (but not exactly). That handbook is not mentioned on the GARP website so I guess it has been obsoleted. Anyway this is a very very convenient book because you find pretty much everything in one place and in electronic format. It is not as detailed as the readings themselves but it gives a very decent overview of what you're supposed to know. It also contains a good number of exam questions with answers. I had this book on my iPhone, iPad and MBP.
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| Hong Kong skyline seen from Cafe Habitu: study with free Wifi and a cool view |
Apart from a few documents available online, 95% of the FRM reading are from books that are not available in electronic form (boooooh!). Because I was traveling and didn't walk around with a camel I relied on the following:
- GARP's AIM statements for the reading plan.
- Libraries (in particular the Singapore national library which had most of the books I needed, the Hong Kong main library on the other hand was no help).
- Jorion's FRM handbook in Kindle format. This is how I kept doing FRM reading on the boat in Thailand, on the resort's peer in Langkawi, in the studenty coffee shops of Taipei, in Hong Kong's Habitu cafes, in the Beijing hutong and during long ferry trips in the Philippines...
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| Boracay |
Time Allocation
According to my logs I spent about 230 hours on FRM study and I felt like I could have used 50 more hours to really complete the material.
Rather than going through the chapters sequentially I've iterated through the readings, jumping to the next chapter when one chapter was taking too long. Sometimes a chapter was building up on a concept introduced in a previous chapter I had not completed. In that case I had to move back to the previous chapter to understand what was going on... That made the reading more interesting I think. I did 4 iterations that were somewhere between 2 and 4 weeks in length.
I took the sample exam questions during the last week of revisions, which was a mistake. I should have taken them earlier because they're very useful.
The questions are multiple-choice questions with 4 possible answers every time. Some questions require calculations (nothing too complex and beyond add/multiply/divide/log), others just judgement. You would think that doing all the non calculation questions first would be easier, well it's not the case :) The qualitative questions can be quite tricky and require some thinking even if you're familiar with the material.
According to my logs I spent about 230 hours on FRM study and I felt like I could have used 50 more hours to really complete the material.
Rather than going through the chapters sequentially I've iterated through the readings, jumping to the next chapter when one chapter was taking too long. Sometimes a chapter was building up on a concept introduced in a previous chapter I had not completed. In that case I had to move back to the previous chapter to understand what was going on... That made the reading more interesting I think. I did 4 iterations that were somewhere between 2 and 4 weeks in length.
I took the sample exam questions during the last week of revisions, which was a mistake. I should have taken them earlier because they're very useful.
The questions are multiple-choice questions with 4 possible answers every time. Some questions require calculations (nothing too complex and beyond add/multiply/divide/log), others just judgement. You would think that doing all the non calculation questions first would be easier, well it's not the case :) The qualitative questions can be quite tricky and require some thinking even if you're familiar with the material.
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| The Spider House in Boracay: read about quantitative analysis with a cocktail |
