GARP - FRM

The purpose of this post is to share my exposure to FRM certification and thus be of some help to the prospective candidates.

FRM stands for Financial Risk Management. It is a certification exam conducted by Global Association of Risk Professionals (GARP). One can know more about the association and certification at http://www.garp.com/frmexam/. The target audience of the certifications would primarily be personnel associated with Mid Office or Front Office operations of a Bank or Financial Institution.

The examination is conducted once a year, during 2nd week of November. The registration commences around March and fees for the examination steps up as the residual time to appear for it diminishes. Thus, there are considerable savings in store for early bird registrations.

The exam tests candidate's expertise in following 5 areas of Risk Management. Based on my preparation for 2008 exam, I have briefly summed up their key aspects. Note that the syllabus and weightages can change from year to year -

Credit Risk Measurement & Management

• This section was heavily problem oriented. Credit VAR was the key.
  
• The models discussed are interesting but bulky. 
  
• It is recommended that material other than handbook and Schweser be referred to for understanding the models
  

Market Risk Measurement & Management

• This section was heavily problem oriented. Market VAR was the key.
  
• If you like Maths, this is the section for you. Pricing, Valuation, Mathematical Models . . its all here
  

Operational & Integrated Risk Management

• I found this section pretty tough. There is a lot of theory involved here. A lot of memorizing is needed.
  
• A number of models are discussed which are largely qualitative in nature.
  
• Besides, the subject itself is pretty grey. If you have not worked in this area, you would have a tough time.
  

 

Quantitative Analysis

• The section mainly carried problems which are primarily related to Probability and Statistics 
  
• This was a small section carrying a weightage of 10%. The questions looked simple but were extremely tricky
  
• Precariously, even a couple of wrong questions could pull down the sectional quartiles given the small size
  

Risk Management & Investment Management

• This section was theory oriented with emphasis on hedge fund industry and equity analysis.
  
• Candidates with 0 hedge fund exposure might be troubled by industry specific jargons and strategies.
  
• However, the section discussing equity analysis makes life simpler
  

Leading study material providers include

1. FRM Handbook by GARP
   
2. Core Reading by GARP
   
3. Content by Schweser
   
4. Content by Bionic Turtle
   

It is reasonable to opt for option (1) together with (2) or (3) or (4). My preparations were made using (1) and (3). Additionally, GARP provides freely downloadable practice exams to all candidates. Do visit FRM threads at www.paagalguy.com/ forums. They are replete with experiences of past and present participants. Another useful site is www.elitebook.net/. It provides scans of old study materials free of cost.

GARP comes out with the exam syllabus in the month of March and associated study materials are out in the market by June. The 5 months from thereon form an adequate preparatory time window for a student investing 2 hours each day. It is of paramount importance that the candidate thoroughly analyzes the practice exams that come along with 

•  FRM Handbook
  
•  Exam registration
  
•  Content from the course provider (e.g. Schweser)
  

FRM is oriented to test the practical knowledge of an individual. Therefore the exam is problem oriented to the extent of say 60% of total questions. If a week before exam, you are consistently scoring 70%+ in the mock tests, consider yourself more or less through.

The compilation and announcement of results take about 2 months. Thus, one can expect a declaration around 3rd week of Jan. The GARP community has made it mandatory for the successful participants to submit 2 years of relevant work experience for receiving the FRM designation. The window provided for this is 5 years. Eligible candidates start receiving their certifications about 3 months after result declaration i.e. 2nd week of April.