A Complete Guide to the FRM Part 2 Syllabus

[Neeraj Gupta]

If you’ve successfully cleared FRM Part 1, congratulations—you’ve built a solid foundation in the world of financial risk management. Now, it's time to dive deeper with FRM Part 2, the second and final step toward becoming a certified Financial Risk Manager. This stage focuses more on application, integration, and real-world risk management practices.

FRM Part 2 consists of 80 multiple-choice questions that must be completed within 4 hours. The syllabus is divided into six main topic areas, each carrying different weightage in the exam. Let’s explore each section in detail.

1. Market Risk Measurement and Management (20%)

This section dives into advanced market risk models and techniques. You'll study topics like Value at Risk (VaR), Expected Shortfall, stress testing, backtesting, volatility models, and scenario analysis. These tools help risk managers identify and quantify exposure to market fluctuations such as interest rate changes, currency risk, and equity price volatility.

2. Credit Risk Measurement and Management (20%)

This topic is critical for understanding how institutions measure and manage credit-related risks. You’ll cover credit exposure, credit value adjustment, credit VaR, and risk mitigation tools like credit derivatives. You'll also learn how banks model and manage default risk, counterparty risk, and portfolio credit risk.

3. Operational and Integrated Risk Management (20%)

Operational risk involves potential losses from failed internal processes, systems, people, or external events. This part of the syllabus covers risk frameworks, governance structures, risk culture, key risk indicators (KRIs), scenario analysis, and loss data collection. It also emphasizes integrated risk management across departments and functions.

4. Liquidity and Treasury Risk Measurement and Management (15%)

This section teaches how financial institutions manage liquidity under normal and stressed conditions. Topics include liquidity coverage ratios, cash flow projections, funding strategies, and contingency planning. You’ll understand how treasury functions work to ensure smooth day-to-day operations and compliance with regulatory liquidity requirements.

5. Risk Management and Investment Management (15%)

In this topic, you’ll explore how risk management concepts are applied in portfolio and investment decision-making. You’ll study risk budgeting, performance attribution, hedge fund strategies, and the impact of risk on portfolio construction. This section bridges the gap between risk control and investment strategy.

6. Current Issues in Financial Markets (10%)

This is the most dynamic section of the FRM Part 2 syllabus. It is updated regularly to reflect real-world trends and emerging risks. Topics often include ESG (Environmental, Social, and Governance) risk, climate risk, cyber risk, financial regulations, innovations like fintech and digital assets, and major economic events. This part ensures that FRM candidates stay relevant in a fast-changing financial landscape.

Final Thoughts

FRM Part 2 tests your ability to apply theoretical knowledge to real-world risk scenarios. It is more analytical and strategic than Part 1, requiring not just memorization but deep understanding and critical thinking. To prepare effectively, create a structured study plan, practice with mock exams, and stay updated with current financial news and trends.

Successfully passing FRM Part 2 marks your readiness to take on complex risk management roles in global financial institutions. It’s the final push toward becoming a certified expert in managing risk in today’s ever-evolving financial markets.

Read Also:

FRM Part 1 Exam Tips and Strategies for Success

Avoid CFA Exam Mistakes – Expert Study Tips

FRM Recorded Classes vs Live Classes – Which is Better?

CFA Level 3 Syllabus, Subjects, Fees, and Exam Details

CFA Level 2 Syllabus, Fees, Exam Dates & Complete Guide