Financial Risk Management (FRM) Experts Interview
This is the first interview in a series of Interviews that EduPristine Careers would conduct. EduPristine would meet professionals/ students / other people, who have been successful in clearing FRM and get their views on how to succeed. EduPristine is hopeful that it would give the readers some insight into how to crack FRM and other certifications in finance.
Paramdeep Singh, a director with EduPristine Careers speaks to Dinesh Chaudhary, an expert in Risk Management. Dinesh has been working in the field of Risk Management for the past 4 years. He has significant experience in implementing Basel and other areas of Risk Management. He has published various articles and papers on Risk Management. Dinesh is both an FRM and a certified risk professional. Dinesh secured ALL Q1s in the FRM Exam
Param: Tell me a brief about your background?
Dinesh: I am a management graduate from IIM-Indore and am working in area of credit risk management in banking sector for the past four years.
Param: Why did you give the?
Dinesh: FRM and PRM are the relevant certifications in the area of risk management and are useful curriculum-wise as well as for placements. Both FRM and PRM are also recognised well by universities offering MSc programmes in quantitative finance as well as Ph.D in finance. Therefore, FRM/ PRM creates multiple opportunities in academics and industry across geographies.
Param: Do you think that background plays an important role in clearing FRM?
Dinesh: Yes, I think it does. I would say that an MBA in Finance (assuming that the candidate studied books like John C Hull in all earnestness) is at an advantage to begin with. Similarly, experience in Risk management, Treasury would provide an advantage, since practical applications of many concepts would already be known. But at the end of the day, anyone who puts in the required effort and displays eagerness to learn can clear the exam.
Param: What has been your Mantra for success?
Dinesh: Learn from the core readings and the reference material because just clearing the exam may not guarantee adequate knowledge as required by the industry, though it might get you a certificate.
Param: When did you start preparing?
Dinesh: Since I was already working in area of credit risk management for two years and was studying John C. Hull since MBA, I was already prepared with credit risk and market risk. Therefore, I studied for four days prior to exam for around 50 hours in total. In the end I can only say that four days are not sufficient for a well-structured study of the core and reference readings mentioned by GARP and one need to start early. My estimate is that atleast 125 hours of study would be required for someone new to the area of risk management to not only clear the exam but also to actually understand the concepts.
Param: That’s quite interesting!! Just 4 days in total???
Dinesh(smiles): Yes that raises the hope that people would be able to clear the exam with minimum hope. But let me be very frank! I was working in the relevant field, reading a lot of research papers and making a lot of models for my bank in the same field. I had prior MBA with knowledge of Derivatives, Fixed Income Securities, Equities, etc. Gaining this experience and knowledge would have taken me around 1000 hours. That could have been one of the reasons why I secured Q1s in all subjects!
Param: Hmm.. that’s interestingÃ¢â‚¬Â¦ so finally in a nut shell how much did you study?
Dinesh: As I told you, I studied for around 50 hours during a span of four days prior to the exam. But this excludes hundreds of hours that I had already spent on reading Hull, Wilmott (still a long way from completion) and credit risk books like Michael Ong, Saunders, Duffie etc., Basel II guidelines and BIS publications, Satyajit Das and Gujarati, prior to applying for FRM.
Param: What subjects did you concentrate on?
Dinesh: I concentrated mainly on market risk because it constitutes 30% weightages and is comparatively more quantitative, providing opportunity for higher scoring. I also spent considerable time revising credit risk and quant, to make sure that I score maximum in the areas I have already studied. Operational risk was a new area for me and I wanted to clear the cut-offs atleast.
Param: What do you think is the best way to crack the subjects?
- Credit Risk: Read Michael Ong and Anthony Saunders for good introduction to the area. Read Merill Lynch Credit Derivatives Handbook (available on internet) for credit derivatives, if time permits.
- Market Risk: Read the bible: John c. Hull and if time permits, Wilmott.
- Operational Risk: Not competent to comment.
- Quantitative Analysis: Gujarati and Levin Rubin and ‘All the math you need’ (Summary given in Wilmott)
Param: Other reference Material that you used while studying?
Dinesh: Not muchÃ¢â‚¬Â¦ I had been studying many research papers for my work.. so did not have to put extra efforts for that.
Param: How best can EduPristine Careers be used for preparing for FRM?
Dinesh: Classroom training can drastically reduce preparation time, especially for those who are new to the area. Also, summary notes and Mock FRM exams maybe used prior to the exam to revise the concepts and keeping a tab on one’s performance.
Param: What are your career plans after achieving the FRM certification?
Dinesh: I plan to continue working in area of risk management.
Param: Lastly, what did you do on the final day before the exam?
Dinesh: I studied, studied and studied and wished for more time to study.
Param: Your Advice to FRM/ Finance aspirants?
Dinesh: Do not take the exam for getting a certification. Take the exam when you seriously intend to learn about the area of risk management or when it is critical from placements point of view. Before taking the exam, see if any other exam is better suited for your area of interest. For instance, a CFA® might be much more useful to a credit or equity analyst or those who wish to enter these areas.
Param: Thanks Dinesh, for taking out time and sharing your views on certification. I hope that we should be able to interact closely in future and resolve the doubts that FRM aspirants raise on our forums.
Dinesh: Welcome. I would be happy to share my experience and knowledge!