Basic FRM® Exam Study Strategies to help you pass your exam

The FRM exam requires you to have a good mastery of the curriculum and understand key risk analysis concepts. In addition, the exam will test you on how to apply these skills to real-life financial situations.

The following basic study strategies will help you recall formulas and essential concepts during the exam.

Understand all basic concepts

The FRM curriculum is comprehensive, and it would be best to understand all basic concepts. Knowing all basic concepts will help you narrow your answer choices during the exam. You should keep in mind the big picture to pass the exam on the first try.

Although you might not get the correct answer by applying basic information on concepts, you will increase your chances of getting the answer right by up to 33%. In addition, this basic information will help you quickly distinguish relevant information in a lengthy question. For example, knowing that effective duration is a measure of interest rate risk, you will eliminate bond rating information in a duration question since bond ratings reflect credit risk.

Know the main topics and their weights in the exam

It would be best to familiarize yourself with the core topics in the FRM curriculum and the weights they carry in the exam. However, these topics and weights vary from one year to the next to keep the curriculum current and relevant.

Knowing these core areas of study will help you make the most of your study sessions and increase your chances of passing. Having an in-depth understanding of these areas will help you get the correct answers to most of the questions and apply your basic knowledge to the other questions.

The 2021 topics and weights are;

FRM part I:

• Financial markets and products (30%) will test your understanding of different financial products and their trading markets.
• Valuation and risk models (30) will test your understanding of various valuation techniques and different risk models.
• Foundations of risk management (20%) focus on your knowledge of the foundation concepts of risk management and how it adds value to an organization.
• Quantitative analysis (20%) tests your knowledge of basic quantitative techniques vital in risk management and understanding basic probability and statistics, regression, and time series analysis.

FRM II:

• Market risk management (20%) will test your knowledge of market risk measurement and different management techniques.
• Credit risk management (20%).  This part of the exam will test your knowledge of structured finance and credit products and default risk measurement.
• Operational and integrated risk management (20%) will test how well you understand operating and integrated risk management.
• Risk management and investment risk management (15%). This part of the exam will test your understanding of different risk management techniques used during investment process management.
• Liquidity and treasury risk measurement and management (15%) will test your understanding of various treasury and liquidity risk management systems.
• Current affairs in financial markets (10%) will test your in-depth knowledge of all the other sections and how you can apply it critically in real situations.

Understand the necessary formulas

The FRM exam will test your understanding of basic concepts and how you can apply them to real financial situations. You will need to use to apply formulas to get the answer to questions that require calculations. Formulas are shorter ways of expressing relationships between concepts.

You should clearly understand the relationships between variables to apply the relevant and correct formula during the exam. However, it is possible to identify some correct answers without using formulas if you have an in-depth understanding of the relationship the exam is testing.

Ensure that you understand each formula as you go through your curriculum and identify the relationships between input variables and when to use it. Consequently, you will be able to recall and apply these formulas correctly during the exam.

Take note of all characteristics of key concepts

One of the most common questions in the FRM exam is identifying the characteristics of a concept, method, or model. For example, a question would be, “which of the following most accurately describes…?” As a candidate, knowing the features of all concepts will help you eliminate wrong answers. You can use flashcards to memorize lists of characteristics and list such as pros and cons.

It is also helpful to understand all areas of the curriculum. You should identify any knowledge gaps and improve your knowledge of them. The FRM exam is comprehensive, and you should master all content, therefore do not ignore challenging areas.

Increase your chances for success with these additional study tips;

Set up a study routine as soon as possible

Setting up a study routine and adhering to it will help you attain an in-depth understanding and mastery of the content.

Develop a study strategy to ensure that you maximize the time you have in each session. You can start by reading or listening to lectures and understanding the information, then learn to apply the knowledge through practicing with examinations.

Identify the core areas of study

The FRM curriculum includes key topics and concepts that you need to master. During your study sessions, paying attention to these areas increases your chances of success.

Practice taking the exam using sample questions and mock tests

It will help if you practice using sample questions and mock examinations as many times as possible, leading to your scheduled exam. Practicing will enable you to identify any knowledge gaps and adjust your study sessions. You will also understand the terms used during testing, the calculations required, and how to apply the knowledge to solve problems.

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