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How to clear FRM part 2 exam?

I have passed the FRM part 2 recently, and now I am a certifed FRM. Given the fact that I learned a lot from other members in FRM Vietnam group, now it is time for me to give back to the society. This note will focus mainly on Part 2.

My background: working for Big 4 Audit for 2.5 years, 1 year in Internal Audit – Risk team for a bank. My results for 2016 November Part 2 FRM: 1, 2, 1, 1, 1 . I studied by myself for both parts.

1. Amount of time you need to prepare: 2-5 months

The amount of time will depend greatly on how conversant you are with risk and Basel and how much time you can spend each day. It took me 3-4 months due to the fact that I majored in Auditing and did not have solid background in risk. Working in risk industry can reduce subtantially time and effort, though I strongly recommend at least 2 months. Do not underestimate the difficulty of the test.

2. Study Materials

a) Schewser Note:

For Part I, I only used Schweser Note. Needless to say, I was quite shocked by the lengthy and tricky questions during the exam. In my opinion, Schewser is useful in summarizing key ideas and good for warm-up reading, but it lacks the details needed to ace the test. For this reason, I suggest using this note for first time, warm-up reading.

Questions at the end of each chapter are shallow and much easier than actual-test one. That said, you can still take advantage of these question sets by mixed-up strategy I will mention below.

Schewser quick sheet is worth reading a couple of days before the test for revising purpose.

b) Bionic Turtle:

I strongly recommend using Bionic Turtle for those who wish to pass the test with flying colour. There are several points that make Bionic Turtle stand out, including:

- a bunch of questions to practice, whose difficulty is commensurate with, or sometimes even harder than the real ones;

- a number of videos, which you can easily find on youtube or more up-to-date version if you purchase its tuition course;

- an active forum where you can ask questions and discuss topics with some smart, experienced people.

However, there are also some points that I wish David Harper can improve in the future:

- Material is a bit messy and out-of-date compared with current curriculum.

- Bionic does not cover all topics in the curriculum.

c) GARP Official Guide:

Garp official textbook is clearly the most important one, but you should read it wisely. Reading GARP takes a lot of time due to sheer amount of information provided in each chapter. Unless you want to be a risk expert in short period of time or pursue PhD in risk, I recommend focusing only on key topics or those topics you are still confused after reading Schweser Note and Bionic. You can easily find key topics by looking at GARP currciclum and identifying topics remained in curriculum for the past several years, for example, VAR methods, correlation and term stucture for market risk; counterparty risk, default probability and securitization for credit risk, etc.

3. Study Strategy

a) Combining material:

Depending on how much time you have, I suggest 2 following plans:

3-5 months:

+ First 1 month: warm up reading by Schweser, answer end-of-chapter question sets using mixed-up strategy

+ 2 month: Thorough GARP and Bionic note reading, answer Bionic question and watching videos on youtube as a way to relax and improve English J

+ Lastmonth: revising by Schweser quick sheet, take the practice exam test under simulation condition

2-3 month:

+ First 1 month: reading Schweser, answer end-of-chapter in Schweser and some keytopics in Bionic.

+ Last 1 month: based on performance on each topic, reinforce those topics you are still confused.

Last 1 week: take the test under simulation condition.

b) Mixed-up strategy:

After studying for two weeks, I realized that reading a whole book, market risk and credit risk, was not only boring and tedious but also ineffective. I created my own studying strategy called mixed-up, which worked out really well for me.

Firstly, you can download study schedule provided by GARP on its website and use it as a base. However, instead of following GARP schedule strictly, you should tailor your schedule based on your strengths and weaknesses.

I started by reading the whole subsection of VAR method for 1 week (parametric, non-parametric, backtesting VAR) and leaving end-of-chapter questions intact. Then, I moved to the next subsection in credit risk for 1 week. After 2 week, I was back and answered the question in market. This method helped increase the difficulty of questions, even the shallow and basic one, significantly because most of the time, you had no idea about the topics you had studied earlier L

c) Track Performance

Keep the excel file of all questions you already attempted to answer,so you are acutely aware of your performance in credit, market and operational risk and reinforce anything below 60%.

Do the same thing when taking the mock exam.

Note: For your comparison, I attained 70-80% for end-of-chapter questions and above 70% for mock exam.

d) Link the topics

If you research the curriculum carefully enough, you soon realize that there are some close relations between topics. For example, correlation is mentioned in market risk and it is also applied heavily in securitazation; LIBOR, stress testing is mentioned once in market risk and once in current issues; liquidity is mentioned in both operational risk and current issues. If you have ability to group topics together, it will shorten the time.

Food for thought

1) Kendall T correlation calculation example in GARP official guide is actually wrong J

2) There are 2 ways (old and new) to compute the Adjusted RAROC in GARP

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