FRM Part II case studies
FRM Part II · Put your knowledge to work in context.
The Financial Risk Manager (FRM) certification, administered by GARP, is a two-part professional credential for people who assess, measure and monitor financial risk in real-world situations. FRM Part II is the second of the two multiple-choice exams: 80 questions that emphasize applying the tools and techniques introduced in Part I. The FRM Part II case studies are 5 cases and about 4,434 words.
1Backtesting a Rates Desk VaR: Eleven Exceptions in 250 Days
A rates trading desk at a global bank runs a 1-day 99% historical-simulation VaR. Over the last 250 trading days the desk recorded 11 losses exceeding reported VaR; 8 of them fell inside a single three-week window around a surprise central-bank decision.
720 words, about 4 min2CVA on a Single-Name Oil Producer: Collateral, Wrong-Way Risk and an Index Hedge
A bank has a single netting set with an oil-and-gas producer rated BBB. The set is a 5-year USD interest-rate swap in which the bank pays fixed; the net mark-to-market in the bank's favour is USD 180m.
896 words, about 4 min3Cloud Outage in Real-Time Payments: Loss Classification, Capital and Resilience Spend
A mid-sized retail bank runs its real-time payments service on a single cloud region. The business impact analysis assigns the service an RTO of 2 hours and an RPO of 15 minutes.
928 words, about 5 min4LCR Under Stress: Deposit Reclassification and a Downgrade Trigger
A bank reports the following at quarter-end (USD m): Level 1 assets 4,200; Level 2A assets at market value 900; Level 2B assets at market value 500. Run-off assumptions: stable retail deposits 8,000 at 5%; less stable retail deposits 3,000 at 10%; operational deposits 6,000 at 25%; non-financial corporate deposits without an operational relationship 4,000 at 40%; financial-institution deposits 1,500 at 100%.
921 words, about 5 min5De-Smoothing Private Credit: Risk Contribution and the Allocation Decision
A pension fund's investment committee is reviewing a 25% allocation to a private-credit fund; the remaining 75% is a global equity index tracker. Over five years the private-credit fund reports an annualised return of 8.0% and volatility of 4.0%, with a reported beta to global equities of 0.20.
969 words, about 5 min