How to prepare for FRM Part 2 Exam? Tried and Tested Strategy!

First of all, Congratulations on clearing your FRM part 1 exam, your hard work has paid off. Just one more level to go and you would clear FRM. How to prepare for FRM part 2? Let’s discuss-

About FRM Part 2

FRM part 2 is second and final level of FRM certification. The FRM part 2 is considered as an advance level exam that has 6 topics, mode of exam is computer-based testing and it has 80 MCQ questions. 

The duration of the exam is 4 hours without any break in middle, it is conducted in the months of May and November; every year.

Historical pass rate for the exam is between 55-60%.  There are no registration charges as you would be returning candidate. If you take early bird the exam cost would be  $550 and for standard it is $750. For the exam, Bifurcation between theory and practical would be around 80:20 i.e.,80% theory and 20% practical.

The topics for the exam with their weightage are as follows –

Exam Topic	Weightage
Liquidity and Treasury risk management and measurement	15%
Market risk measurement and management	20%
Credit risk measurement and management	20%
Operational risk and Resiliency	20%
Risk management and Investment Management	15%
Current issues in financial markets	10%

FRM Part 1 Vs Part 2 Exam Preparation

Following are key differences between FRM Part 1 and Part 2 exam –

• Course – The students get a brief overview of the Risk management world in FRM part1. in Part 2 you get to know each type of risk up close. As every type of risk has its own dedicated book which provides you detailed knowledge of that particular kind of risk, you will learn every type of risk in detail and get to know what kind of risk type interests you more.
• Type of Questions in exam – The exam tests your conceptual knowledge; student feedback suggests that exam has questions where you need to solve real life problems. This means that you will have to gain conceptual in-depth knowledge of every topic. This was not the case with FRM Part 1 exam.
• Number of Questions in Exam – FRM part 1 had 100 MCQs which makes it difficult to manage time, this would not be an issue as FRM part 2 has 80 MCQs.
• Availability of material – Question banks and practice questions available for FRM part 2 are considerably limited when compared to part 1 exam.

Study Material

In Part 1 we used either Schweser or GARP books, but in part 2 we would suggest to go through the Schweser books once for all topics, after that go for GARP or Bionic turtle for the difficult chapters as they have been described well and at a stretch in these books.

As earlier stated, there are limited questions available for FRM part 2, try to solve as many questions that you can find.

For a more detailed insight: Best FRM Study Materials in 2023 (Courses, Books & Videos)

Study Plan

Two rules to study for FRM part 2 would be – 

1. Start early – A lot of topics are there to cover, you will need to start your preparation as early as possible.
2. Study again – You will need to re-read and revise topics more than you did in Part 1.

Suggested study hours for the exam are 400-450 Hours, bifurcation of the study time is as follows-

First reading	200-220 Hours	Reading Entire material along with video lectures (If opted for), Highlight important topics that would help in revision.
First Revision	100-120 Hours	This reading will be with increased speed to pay more emphasis on highlighted topics and difficult chapters
Second revision	90-110 Hours	Try to increase your speed a bit more in this reading, solve as many questions as you can with this reading.
Mock test	10-14 Hours	Attempt at least 2 Mock test in exam like environment before going for actual exam.

Overview of topics and Study Sequence

Although there is no specified study sequence for FRM part 2 as topics are individual in nature, but let us try to make a logical sequence –

1. Market Risk – Students find this topic difficult yet interesting at the same time, this book is related more to FRM part 1 than any other book so we will start with this one.  The book is overall upgradation on topics like VAR, Bond valuation and option pricing. It is always better to start with a difficult topic so that once you finish it, you feel a bit confident about your preparation.
2. Credit Risk – A detailed analysis on credit risk and type of credit risk like counterparty credit risk, Portfolio credit risk, Securitization. The topic is mix of practical and theory, expect some model-based questions in exam from this topic. Pay more attention to this topic as credit risk covers a large chunk of available job opportunities in India.
3. Operational Risk – This topic is theory heavy, a lot of topics to be read which cover Basel norms, Cyber risk and Money laundering. After completing 2 topics which are mix of theory and practical, this would be a change to go for theory topic.
4. Investment risk – A book that is relatively small but has equally important topics. The book has construction, monitoring and evaluation of portfolio plus different factors associated with it. We will take this topic 4^th in line.
5. Liquidity risk – This is relatively new topic which was added 2 years back in curriculum to make students understand that how important is liquidity for organization, industry or country’s survival. Ideally this topic should be read 5^th in sequence.
6. Current issues – Unanimously, every prep provider and coaching suggest to go for this topic at the end (may be 10 days prior to your exam). About 2 reading of each topic would be good enough and you will have them fresh in mind while writing examination.

Study Tips

• Try not to lose marks in practical questions as they are our scoring areas. Theory might be subjective but answers of practical questions are well defined.
• Take breaks between preparation, ideally one day in 3 weeks of preparation to avoid getting exhausted from preparation. Talk to other candidates about topics that you find difficult to get their point of view and more clarity on the topic. Try to be disciplined and continuous with your preparation, it will help you clear FRM part 2 more efficiently.
• If you are looking for specific job roles after FRM, try to learn additional skills like Python, R, Financial modelling, SQL etc. that your job role may require. How to know what skills are needed for desired job? Get on LinkedIn or any career portal, search for desired job roles and see what are the additional skills needed in suitable candidate.

Frequently Asked Questions