FRM Part 2 Study Notes

Market Risk Measurement and Management

1. Estimating Market Risk Measures
2. Non-Parametric Approaches
3. Backtesting VaR
4. VaR Mapping
5. Messages from the Academic Literature on Risk Management for the Trading Book
6. Some Correlation Basics: Properties, Motivation, Terminology
7. Empirical Properties of Correlation: How Do Correlations Behave in the Real World?
8. Statistical Correlation Models – Can We Apply Them to Finance?
9. Financial Correlation Modeling – Bottom-Up Approaches
10. Empirical Approaches to Risk Metrics and Hedging
11. The Science of Term Structure Models
12. The Evolution of Short Rates and the Shape of the Term Structure
13. The Art of Term Structure Models: Drift
14. The Art of Term Structure Models: Volatility and Distribution
15. Volatility Smiles

Credit Risk Measurement and Management

1. The Credit Decision
2. The Credit Analysis
3. Classifications and Key Concepts of Credit Risk
4. Rating Assignment Methodologies
5. Credit Risks and Credit Derivatives
6. Spread Risk and Default Intensity Models
7. Portfolio Credit Risk
8. Structured Credit Risk
9. Defining Counterparty Credit Risk
10. Netting, Compression, Resets, and Termination Features
11. Collateral
12. Credit Exposure
13. Central Counterparties
14. Default Probability, Credit Spreads, and Credit Derivatives
15. Credit Value Adjustment
16. Wrong-Way Risk
17. The Evolution of Stress Testing Counterparty Exposures
18. Credit Scoring and Retail Credit Risk Management
19. The Credit Transfer Markets – And Their Implications
20. An Introduction to Securitisation
21. Understanding the Securitization of Subprime Mortgage Credit

Operational and Integrated Risk Management

1. Principles for the Sound Management of Operational Risk
2. Enterprise Risk Management: Theory and Practice
3. Observations on Developments in Risk Appetite Frameworks and IT Infrastructure
4. Information Risk and Data Quality Management
5. OpRisk Data and Governance
6. External Loss Data
7. Capital Modeling
8. Standardised Measurement Approach for Operational Risk
9. Parametric Approaches (II): Extreme Value
10. Validating Rating Models
11. Model Risk
12. Risk Capital Attribution and Risk-Adjusted Performance Measurement
13. Range of Practices and Issues in Economic Capital Frameworks
14. Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice
15. Repurchase Agreements and Financing
16. Estimating Liquidity Risks
17. Assessing the Quality of Risk Measures
18. Liquidity and Leverage
19. The Failure Mechanics of Dealer Banks
20. Stress Testing Banks
21. Guidance on Managing Outsourcing Risk
22. Basel I, Basel II, and Solvency II
23. Basel II.5, Basel III, and Other Post-Crisis Changes
24. Fundamental Review of the Trading Book
25. Sound Management of Risks related to Money Laundering and Financing of Terrorism

Risk Management and Investment Management

1. Factor Theory
2. Factors
3. Alpha (and the Low-Risk Anomaly)
4. Illiquid Assets
5. Portfolio Construction
6. Portfolio Risk: Analytical Methods
7. VaR and Risk Budgeting in Investment Management
8. Risk Monitoring and Performance Measurement
9. Portfolio Performance Evaluation
10. Hedge Funds
11. Performing Due Diligence on Specific Managers and Funds