【FRM Part I】 Review :: Preparation Strategy & Result

Occupation: Goverment Office Employee (Full-time) & Tutor (Part-time)

Experience in Finance: 0

Study Period: 5 months

Preparation

When I signed up for FRM Part I, I was working one full-time and one part-time shifts. Due to time constraint, I spent a good amount of time to come up with an efficient roadmap for the test.

 

 

Preparation Plan

	Foundation of Risk Management	Quantitative Analysis	Financial Markets and Products	Valuation and Risk Models
January	Planning
February	Risk Types Risk Governance & Corporate Governance	Basic Statistics Probability	Financial Institutions Clearing	VaR ES Regulatory Capital Stress Testing
March	CAPM MPT APT Factor Models	Statistical Inference Hypothesis Testing Regression	Derivative Valuation Bond Valuation Hedging	-
April	-	Time Series Simulation	Swap Interest Rates Foreign Exchange	Bionmial Tress BSM Model Greeks Fixed Income
May	Credit Risk ERM Case Study Ethics	-	MBS	Operational Risk Expected Loss Credit Rating Sovereign Risk

 

 

FRM is well structured in a way that the test-taker would be able to understand financial analysis from various perspectives. For instance, a concept of "hedging" is introduced first as a statistical concept, and then developed into a more holistic metrics for various decision makers such as quantitative analyst, portfolio manager, or even CEO of a firm that is exposed to certain risks. That said, many of these concepts are interconnected, if not repetitive. Hence, when well-planned, much of the redundant sections can be studied altogether.

 

Main recurring topics include:

• Risk Metrics (VaR, ES)
• Risk Types (Operational Risk, Credit Risk)
• Regression/Correlation (CAPM, Factor Models, Regression, Hypothesis Testing, Stress Testing)
• Valuation of Bonds, Swaps, Forwards, Futures
• Financial Products and Risks (Case Study, MBS)

Through studying the recurring topics together, I was able to eliminate the need to go over them repeatedly. 

 

If you would like to learn which topics are covered in the exam, please take a look at my previous post on Introduction to FRM.

 

2020/06/17 - [Certifications & Designations/FRM] - FRM (1) :: Introduction to FRM

 

 

 

Resources

I used four resources: (1) Schweser Notes, (2) Online Lectures, (3) Test Bank, (4) Original Texts/Journals.

 

Schweser Notes

Schweser Notes is a summary note published by Kaplan. By far, Schweser Notes has been the most reliable and complete resource for FRM preparation. (As a side note, FRM notes are more effectively and thorougly organized than CFA's). Because Schweser Notes are still a summarized version of the Original Texts/Journals cited in FRM's Learning Objectives, it is definitely not an exhaustively complete resource. That being said, I spent best effort to understand every line in the note rather than summarizing the note again. 

 

Online Lectures

I took online lectures from EPassKorea, a Korean test preparation service provider, primarily to fill the gaps between my knowledge and new concepts. For those who have yet taken any finance-related exams or courses, I recommend that you keep the online lectures available on the side. Because many of FRM's concepts are interdisciplinary, when you lack familiarity with one of the fields, it could be difficult to build good foundations relating to valuation, risk management, or regression. While I only watched the lessons that I deemed necessary, it served me well in connecting how class-taught statistics and econometrics can be applied in the field of finance and risk management.

 

Test Bank

I rarely used test bank. Test Bank's problem is that it is time-consuming. FRM covers such a wide range of topics that it is nearly impossible to solve problems for each topic with time constraint. Also, the questionaires vary too much in terms of difficulty and length, which do not necessarily prepare you for the test. It would be a good resource if your retention of knowledge is substantially greater when learned by solving problems.

 

Original Text/Journals or FRM e-book

By Original Text/Journals, I am referring to the textbooks and academic journals that are used by GARP to prepare the e-book. These resources are definitely the best and most reliable resources if you have all the time in the world. Given time constraint, however, they are too long, too deep, and too wide for test preparation purposes. However, I would like to note that, in retrospect, a large number of questions from Part I was not even introduced in Schweser Note. If you have sufficient time, I recommend that you refer to (4) Original Text/Journals to reinforce insufficient information.

 

 

Test

FRM Part I was definitely challenging; even more so than CFA Level 1 or 2. Questions were about 5-7 sentences in length on average; no question could be solved with a simple arithematic (unlike CFA Level 1). All questions required an interdisciplinary understanding. Frankly speaking, this test was one of the few tests where time was insufficient to actually solve all the questions.

 

 

Result

After much waiting, I received an email that I passed the exam. This was quite unexpected given the number of questions I could not solve confidently. I believe it was due to the exam's extraordinary difficulty that resulted in a lower curve, allowing me to fall within a passing range.

 

 

Recap

While I tried to prepare as seamlessly as possible, I was not able to stick by the plan due to lack of knowledge in particular sections. However, it was definitely a challenging kickstart that set me on a more comfortable track in pursuing CFA level I and level II exams. Based on my experience, I would like to point out two things to keep in mind before signing up for the test.

 

(1) FRM Part I is more difficult (in terms of depth) than CFA Level I or CFA Level II.

(2) FRM Part I can be taken together with Part II.

 

That said, if I were to speak to my old-self, I would recommend that I first pursue CFA Level I, and then take both parts of FRM at once for best efficiency.