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FRM Exam Syllabus

The FRM exam is administered by the FRM Committee. The members of the FRM Committee are from diverse backgrounds having expertise in their risk professions. A regular survey is made across different financial and investment industries to synthesize the knowledge and skills that are required in efficient risk management. The FRM Exam syllabus consists of topics in financial risk management which help in relating theoretical knowledge with the practical approach.

FRM Part 1 Exam- Topic-wise weightage

There are 100 MCQs to test the candidates’ knowledge in the areas of risk management, financial markets and products, quantitative analysis and essential risk modelling. The table below gives a topic-wise weightage of the topic areas covered in FRM part 1 exam.

Topic Weight

Foundations of Risk Management


Quantitative Analysis


Financial markets and Products


Valuation and Risk models


The detailed topic wise syllabus for FRM Part 1 Exam is given in the following table:


• The role of risk management

• Basic risk types, measurement and management tools

• Creating value with risk management

• Modern Portfolio Theory (MPT)

• Standard and non-standard forms of the Capital Asset Pricing Model (CAPM)

• Single and multi-index models and the Arbitrage Pricing Theory (APT)

• Risk-adjusted performance measurement

• Enterprise Risk Management

• Financial disasters and risk management failures

• Case studies

• Ethics and the GARP Code of Conduct


• Discrete and continuous probability distributions

• Population and sample statistics

• Statistical inference and hypothesis testing

• Estimating the parameters of distributions

• Graphical representation of statistical relationships

• Linear regression with single and multiple regressors

• The Ordinary Least Squares (OLS) method

• Interpreting and using regression coefficients, the t-statistic, and other output

• Hypothesis testing and confidence intervals

• Monte Carlo Methods

• Estimating correlation and volatility using EWMA and GARCH models

• Volatility term structures

• Quantifying volatility in VaR models


• Mechanics of OTC and exchange markets

• Forwards, futures, swaps and options

• Mechanics

• Pricing and factors that affect it

• Uses in hedging and hedging strategies

• Delivery options

• Interest rates and measures of interest rate sensitivity

• Derivatives on fixed income securities, interest rates, foreign exchange, and equities

• Commodity derivatives

• Foreign exchange risk

• Corporate bonds


• Value-at-Risk (VaR)

• Applied to stock, currencies, and commodities

• Applied to linear and non-linear derivatives

• Applied to fixed income securities with embedded options

• Structured Monte Carlo, stress testing, and scenario analysis

• Extending VaR to operational risk

• Limitations as a risk measure

• Coherent risk measures

• Option valuation

• Pricing options using binomial trees

• The Black-Scholes-Merton Model

• The “Greeks”

• Fixed income valuation

• Discount factors, spot rates, forward rates, and yield to maturity

• Arbitrage and the Law of One Price

• One factor measures of price sensitivity

• Country and sovereign risk models and management

• Fundamental analysis

• External and internal credit ratings

• Expected and unexpected losses

• Operational risk

• Stress testing and scenario analysis

FRM Part 2 Exam- Topic-wise weightage

FRM part 2 exam comprises of 80 multiple-choice questions in the areas of market risk, credit risk, operational risk, integrated risk management and current financial market issues. The table below gives a topic-wise weightage of the topic areas covered in FRM part 2 exam.



Market Risk


Credit Risk


Operational Risk


Risk Management and Investment Management


Current Issues in Financial markets


The detailed topic wise syllabus for FRM Part 2 Exam is given in the following table:


• Fixed income securities

• Duration, DV01, and convexity

• Key rate exposures

• Hedging and immunization

• Risk neutral pricing

• Mortgages and mortgage-backed securities (MBS)

• Structure, markets, and valuation

• VaR and other risk measures

• VaR mapping

• Backtesting VaR

• Expected shortfall (ES) and other coherent risk measures

• Parametric and non-parametric methods of estimation

• Modeling dependence: correlations and copulas

• Extreme value theory (EVT)

• Volatility: smiles and term structures

• Exotic options


• Subprime mortgages and securitization

• Counterparty risk and OTC derivatives

• Credit risk concentration

• Credit derivatives

• Types and uses

• Mechanics and structure

• Valuation

• Structured finance and securitization

• The structuring and securitization process

• Agency problems and moral hazard in the securitization process

• Tranching, subordination, and support

• Default risk

• Quantitative methodologies

• Loss given default and recovery rates

• Estimating defaults and recoveries from market prices and spreads

• The use of historical default rates and credit risk migration

• Expected and unexpected losses

• Credit VaR


• Calculating and applying risk-adjusted return on capital (RAROC)

• Understanding, managing, and mitigating liquidity risk

• Understanding and managing model risk

• Evaluating the performance of risk management systems

• Validating VaR models

• Enterprise risk management (ERM)

• Economic capital

• Operational loss data

• Frequency and severity distributions

• Modeling and fitting distributions

• Data sufficiency

• Extrapolating beyond the data

• Failure mechanics of dealer banks

• Regulation and the Basel Accords

• Minimum capital requirements

• Methods for calculating credit, market, and operational risk

• Liquidity risk management

• Modeling risk aggregation

• Stress testing

• Revisions to the Basel II Accord

• The Basel III framework


• Portfolio construction

• Portfolio-based performance analysis

• Tests of the Capital Asset Pricing Model (CAPM)

• Portfolio and component VaR

• Risk budgeting

• Risk monitoring and performance measurement

• Hedge funds

• Hedge fund strategies

• Due diligence and fraud detection

• Liquidity

• Risk management of hedge funds

• Private equity


• Causes, consequences, and lessons learned from the current crisis

• Impact of financial development on risk

• Sovereign risk

• The U.S. and Irish credit crisis

• The Icelandic banking collapse

• Trading Fraud

• Systemic Risk Management

• Active Risk Management


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