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FRM 2
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2016 FRM® EXAM
Study GuideChanges
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved.2
Part I ChangesFoundations of Risk Management
1. RenéStulz,“Governance,RiskManagementandRisk-TakinginBanks,”FinanceWorkingPaper427/2014,
June2014.
2. JohnHull,RiskManagementandFinancialInstitutions,4thEdition(NewYork:JohnWiley&Sons,2015).
•Chapter6.TheCreditCrisisof2007
Additions:
1. “ImplementingRobustRiskAppetiteFrameworkstoStrengthenFinancialInstitutions,”Instituteof
InternationalFinance,June2011.(ExecutiveSummary—Section4,pages10–40).
2. JohnHull,RiskManagementandFinancialInstitutions,3rdEdition(NewYork:JohnWiley&Sons,2012).
•Chapter6.TheCreditCrisisof2007
Deletions:
Onthefollowingpages,anasteriskafterareadingtitleindicatesthatthereadingisfreelyavailableontheGARPwebsite.
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved. 3
Part I ChangesQuantitative Analysis
1. ChrisBrooks,IntroductoryEconometricsforFinance,3rdEdition(Cambridge,UK:CambridgeUniversity
Press,2014).
•Chapter13.SimulationMethods(Note:EViewsandotherprogrammingreferencesarenotrequired).
2. JohnHull,RiskManagementandFinancialInstitutions,4thEdition(NewYork:JohnWiley&Sons,2015).
•Chapter11.CorrelationsandCopulas
Additions:
1. JohnHull,RiskManagementandFinancialInstitutions,3rdEdition(NewYork:JohnWiley&Sons,2012).
•Chapter11.CorrelationsandCopulas
2. DessislavaPachamanovaandFrankFabozzi,SimulationandOptimizationinFinance(Hoboken,NJ:John
Wiley&Sons,2010).
•Chapter4.SimulationModeling
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved.4
Part I ChangesFinancial Markets and Products
1. JonGregory,CentralCounterparties:MandatoryClearingandBilateralMarginRequirementsforOTC
Derivatives(WestSussex,UK:JohnWiley&Sons,2014).
•Chapter1.Introduction
•Chapter2.Exchanges,OTCDerivatives,DPCsandSPVs
•Chapter3.BasicPrinciplesofCentralClearing
•Chapter14(section14.4only).RisksCausedbyCCPs:RisksFacedbyCCPs
Additions:
1. TheInstituteforFinancialMarkets,FuturesandOptions(Washington,DC:TheInstituteforFinancialMar-
kets,2011).
•Chapter1.Introduction:FuturesandOptionsMarkets
•Chapter2.FuturesIndustryInstitutionsandProfessionals
•Chapter7.HedgingwithFuturesandOptions
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved. 5
Part I ChangesValuation and Risk Models
1. AswathDamodaran,CountryRisk:Determinants,MeasuresandImplications-The2015Edition(July14,
2015),(pages1-45only).
2. JohnHull,RiskManagementandFinancialInstitutions,4thEdition(Hoboken,NJ:JohnWiley&Sons,2015).
•Chapter23.OperationalRisk
Additions:
1. JohnHull,RiskManagementandFinancialInstitutions,3rdEdition(Boston,PearsonPrenticeHall,2012).
•Chapter20.OperationalRisk
2. DanielWagner,ManagingCountryRisk:APractitioner’sGuidetoEffectiveCross-BorderRiskAnalysis
(BocaRaton,FL:Taylor&FrancisGroup,2012).
•Chapter3.AssessingCountryRisk
•Chapter4.CountryRiskAssessmentinPractice
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved.6
Part II ChangesMarket risk Measurement and Management
None
Additions:
None
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved. 7
Part II ChangesCredit Risk Measurement and Management
1. JonGregory,CounterpartyCreditRiskandCreditValueAdjustment:AContinuingChallengeforGlobal
FinancialMarkets,2ndEdition(WestSussex,UK:JohnWiley&Sons,2012).
•Chapter7.CentralCounterparties
2. MichelCrouhy,DanGalaiandRobertMark,TheEssentialsofRiskManagement,2ndEdition(NewYork:
McGraw-Hill,2014).
•Chapter9.CreditScoringandRetailCreditRiskManagement
•Chapter12.TheCreditTransferMarkets-andTheirImplications
3. MooradChoudhry,StructuredCreditProducts:CreditDerivatives&SyntheticSecuritisation,2ndEdition
(NewYork:JohnWiley&Sons,2010).
•Chapter12.AnIntroductiontoSecuritisation
Additions:
1. ChristopherCulp,StructuredFinanceandInsurance:TheArtofManagingCapitalandRisk
(Hoboken,NJ:JohnWiley&Sons,2006).
•Chapter12.CreditDerivativesandCredit-LinkedNotes
•Chapter13.TheStructuringProcess
•Chapter16.Securitization
•Chapter17.CashCollateralizedDebtObligations
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved.8
Part II ChangesOperational and Integrated Risk Management
1. MarceloG.Cruz,GarethW.Peters,andPavelV.Shevchenko,FundamentalAspectsofOperationalRisk
andInsuranceAnalytics:AHandbookofOperationalRisk(NewYork:JohnWiley&Sons,2015)
•Chapter2:OpRiskDataandGovernance
2. MichelCrouhy,DanGalaiandRobertMark,TheEssentialsofRiskManagement,2ndEdition(NewYork:
McGraw-Hill,2014).
•Chapter15.ModelRisk
•Chapter17.RiskCapitalAttributionandRisk-AdjustedPerformanceMeasurement
3. KevinDowd,MeasuringMarketRisk,2ndEdition(WestSussex,England:JohnWiley&Sons,2005).
•Chapter14.EstimatingLiquidityRisks
4. JohnHull,RiskManagementandFinancialInstitutions,4thEdition(Hoboken,NJ:JohnWiley&Sons,2015).
•Chapter15.BaselI,BaselII,andSolvencyII
•Chapter16.BaselII.5,BaselIII,andOtherPost-CrisisChanges
•Chapter17.FundamentalReviewoftheTradingBook
Additions:
1. PhilippaX.Girling,OperationalRiskManagement:ACompleteGuidetoaSuccessfulOperationalRisk
Framework(Hoboken:JohnWiley&Sons,2013).
•Chapter7.InternalLossData
2. MichelCrouhy,DanGalaiandRobertMark,TheEssentialsofRiskManagement,2ndEdition(NewYork:
McGraw-Hill,2001).
•Chapter14.CapitalAllocationandPerformanceMeasurement
3. KevinDowd,MeasuringMarketRisk,2ndEdition.
•Chapter16.ModelRisk
4. JohnHull,RiskManagementandFinancialInstitutions,4thEdition(NewYork:JohnWiley&Sons,2015).
•Chapter12.BaselI,BaselIIandSolvencyII
•Chapter13.Basel2.5,BaselIII,andDodd-Frank
Deletions:
1. “BaselIII:thenetstablefundingratio.”(BaselCommitteeonBankingSupervisionPublication,October2014).*
Additions:
OptionalRegulatoryReadingsforReference
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved. 9
Part II ChangesRisk Management and Investment Management
1. ZviBodie,AlexKane,andAlanJ.Marcus,Investments,10thEdition(NewYork:McGraw-Hill,2013).
•Chapter24.PortfolioPerformanceEvaluation
Additions:
1. ZviBodie,AlexKane,andAlanJ.Marcus,Investments,9thEdition(NewYork:McGraw-Hill,2010).
•Chapter24.PortfolioPerformanceEvaluation
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved.10
Current Issues in Financial Markets
Part II Changes
1. Glasserman, Paul. (2012). Forging Best Practices in Risk Management (Note: Only Section 2: Firm-Level
Issues in Risk Measurement). Office of Financial Research Working Paper #0002.*
2. Yorulmazer, Tanju. (2014). “Case Studies on Disruptions During the Crisis”. FRBNY Economic
Policy Review.*
3. “Why do we need both liquidity regulations and a lender of last resort? A perspective from Federal
Reserve lending during the 2007-09 U.S. financial crisis”. Federal Reserve Board. February 2015.*
4. Global financial markets liquidity study (Note: Sections 1, 2, and 4 only). PwC. August 2015.*
5. Duffie, Darrell and Stein, C. Jeremy. (2015). “Reforming LIBOR and Other Financial Market Bench-
marks.” Journal of Economic Perspectives—Volume 29, Number 2. Spring 2015. pp 191–212.*
6. Froukelien Wendt. (2015). “Central Counterparties: Addressing their Too Important to Fail Nature”. IMF
Working Paper.*
7. German Gutierrez Gallardo (NYU), Til Schuermann (Oliver Wyman), Michael Duane (Oliver Wyman).
2015. “Stress Testing Convergence”.*
8. “Cybersecurity 101: A Resource Guide for Bank Executives”. Conference of State Banking Supervisors.
December 2014.*
Additions:
Allofpreviousreadingsshouldbedeleted.
Deletions:
2016 Financial Risk Manager (FRM®) Exam Study Guide Changes
© 2016 Global Association of Risk Professionals. All rights reserved.12
Creating a culture of risk awareness®
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www.garp.org
About GARP |TheGlobalAssociationofRiskProfessionals(GARP)isanot-for-profitglobalmembershiporganizationdedicatedto
preparingprofessionalsandorganizationstomakebetterinformedriskdecisions.Membershiprepresentsover150,000riskman-
agementpractitionersandresearchersfrombanks,investmentmanagementfirms,governmentagencies,academicinstitutions,and
corporationsfrommorethan195countriesandterritories.GARPadministerstheFinancialRiskManager(FRM®)andtheEnergyRisk
Professional(ERP®)exams;certificationsrecognizedbyriskprofessionalsworldwide.GARPalsohelpsadvancetheroleofriskman-
agementviacomprehensiveprofessionaleducationandtrainingforprofessionalsofalllevels.