FRM Part II – Financial Risk Manager

Develop Advanced Expertise in Financial Risk Management, Banking Risk and Investment Risk Analysis

FRM Part II – Financial Risk Manager is the second and final examination level of the globally recognised Financial Risk Manager (FRM®) certification programme conducted by the Global Association of Risk Professionals (GARP), USA.

Building upon the fundamental concepts covered in FRM Part I, the examination focuses on the practical application of advanced risk management techniques across financial institutions, investment portfolios and global financial markets.

FRM Part II combines market risk, credit risk, operational risk, liquidity and treasury risk, investment risk management and current financial market developments, developing the analytical and professional skills required to evaluate complex financial risks.

As a GARP Approved Exam Preparation Provider, Actuators Educational Institute (AEI) offers structured preparation aligned with the FRM Part II curriculum.

Course Structure & Syllabus

FRM Part II comprises six major subject areas covering advanced financial risk management techniques and their practical applications.

Key Topics Covered:

1. Market Risk Measurement & Management:
   Value at Risk (VaR), Expected Shortfall, volatility modelling, stress testing, scenario analysis, interest rate models, correlations and financial market risk assessment.
2. Credit Risk Measurement & Management:
   Probability of Default (PD), Loss Given Default (LGD), Expected Loss (EL), credit ratings, counterparty risk, credit derivatives, credit portfolio models and securitisation.
3. Operational Risk & Resilience:
   Operational risk frameworks, risk governance, internal controls, cyber risk, business continuity, regulatory capital, operational risk events and organisational resilience.
4. Liquidity & Treasury Risk Management:
   Funding liquidity, market liquidity, liquidity risk measurement, Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), asset-liability management and liquidity stress testing.
5. Risk Management & Investment Management:
   Portfolio risk measurement, factor models, risk budgeting, portfolio construction, hedge funds, investment performance, risk-adjusted returns and investment risk strategies.
6. Current Issues in Financial Markets:
   Emerging financial risks, artificial intelligence, financial technology, geopolitical risks, private credit, digital assets, financial stability and evolving regulatory developments.

The FRM Part II syllabus focuses on advanced risk measurement, risk mitigation, financial regulation, portfolio risk management and practical financial decision-making.

Syllabus Topics & Weightages

The FRM Part II curriculum comprises six principal areas:

The weightages reflect the established FRM Part II curriculum structure. GARP reviews the curriculum annually, and candidates should refer to the official learning objectives applicable to their examination year.

Examination Structure

FRM Part II is a computer-based multiple-choice examination assessing the application of advanced financial risk management concepts to practical financial scenarios.

Important Examination Guidelines

• Multiple-Choice Examination:
  Candidates must attempt 80 equally weighted questions within four hours.
• Practical & Case-Based Applications:
  Questions assess the application of advanced risk management techniques to realistic financial situations.
• Quantitative & Conceptual Assessment:
  Candidates must demonstrate analytical reasoning, numerical accuracy and practical understanding of risk models.
• Calculators:
  Only calculator models approved by GARP are permitted.
• Formula Requirements:
  Candidates are expected to understand and apply relevant financial and statistical formulas without a provided formula sheet.
• Examination Booking:
  Candidates must register through GARP and schedule their examination appointment within the applicable testing window.
• Examination Conduct:
  Candidates must comply with GARP’s identification, calculator, examination security and testing-centre requirements.

Eligibility Criteria

FRM Part II is suitable for candidates seeking advanced expertise in financial risk management.

• No minimum educational qualification or professional experience is required to register for the FRM programme.
• Candidates may prepare for FRM Part II while studying for or awaiting the results of FRM Part I.
• Candidates must pass FRM Part I before their FRM Part II examination result can be recognised.
• Candidates are required to pass FRM Part II within four years of passing FRM Part I, in accordance with GARP’s certification requirements.
• A strong understanding of quantitative analysis, financial markets, derivatives and risk management concepts from FRM Part I is recommended.

Important: To obtain the FRM certification, candidates must pass both examination levels and submit evidence of at least two years of relevant professional work experience within GARP’s prescribed timeframe.

Learning Objectives

Studying FRM Part II develops the ability to:

• Measure and manage advanced financial market risks.
• Evaluate credit risk and counterparty exposures.
• Apply operational risk and resilience frameworks.
• Assess liquidity and treasury-related risks.
• Interpret regulatory capital and risk management requirements.
• Apply portfolio risk measurement and investment management techniques.
• Conduct stress testing and scenario analysis.
• Evaluate emerging risks in global financial markets.
• Apply professional judgement to complex financial risk management decisions.

Practical Applications of FRM Part II

The knowledge gained in FRM Part II is applicable across several financial and risk management disciplines:

1. Banking & Financial Institutions:
   Managing market, credit, liquidity and operational risks while supporting regulatory compliance and capital adequacy.
2. Investment & Portfolio Management:
   Assessing portfolio exposures, evaluating risk-adjusted returns and developing investment risk management strategies.
3. Insurance & Asset-Liability Management:
   Evaluating investment risks, managing financial liabilities and conducting stress testing.
4. Treasury & Corporate Risk Management:
   Managing funding liquidity, interest rate exposures, financial risks and treasury operations.
5. Financial Risk Consulting & Advisory:
   Developing risk management frameworks, evaluating financial models and providing recommendations on enterprise risk management.

FRM Part II develops advanced financial risk management knowledge and completes the examination component of the FRM certification pathway, subject to fulfilment of GARP’s professional experience requirements.

Technical Requirements – AEI Learning Application

To access online classes, recorded lectures and digital study resources, students must ensure their devices meet the following minimum technical requirements of the Actuators Educational Institute (AEI) Learning Application.