Apendix Topics Testability

[Roberto Hernández]

Hi Team,

I hope you're doing great. I have a pretty simple question that probably has been answered previously. I have seen some contents that are marked as part of previous years FRM curriculum and placed on the Apendix piece of each study note/practice question.

Having said that, my question is, can we assume from these contents (study notes/questions) not to be tested? i.e., can we skip or just skim these contents if relevant?

To provide an example, R3.P1.T1 which is Stulz, Risk Management and Risk-Taking in Banks contains a fairly large Apendix with previous content.

Thank you very much!
-Roberto

 

[Nicole Seaman]

Hi Team,

I hope you're doing great. I have a pretty simple question that probably has been answered previously. I have seen some contents that are marked as part of previous years FRM curriculum and placed on the Apendix piece of each study note/practice question.

Having said that, my question is, can we assume from these contents (study notes/questions) not to be tested? i.e., can we skip or just skim these contents if relevant?

To provide an example, R3.P1.T1 which is Stulz, Risk Management and Risk-Taking in Banks contains a fairly large Apendix with previous content.

Thank you very much!
-Roberto

Hello @Roberto Hernández

We place the previous practice questions in an appendix because many of the topics in those practice questions are still testable. Just because the reading has been removed from the curriculum, it doesn't mean that the concepts discussed in that reading have been removed. If you look at the AIMS (now called Learning Objectives) in the practice questions that are in the appendix, many times you will notice that they are very close to the current learning objectives that are discussed in the new reading. We want to make sure that we do not "waste" good practice questions that are still relevant to the current exam, as this gives our members more materials to learn from. I hope this helps!

Nicole

 

[Roberto Hernández]

Hello @Roberto Hernández

We place the previous practice questions in an appendix because many of the topics in those practice questions are still testable. Just because the reading has been removed from the curriculum, it doesn't mean that the concepts discussed in that reading have been removed. If you look at the AIMS (now called Learning Objectives) in the practice questions that are in the appendix, many times you will notice that they are very close to the current learning objectives that are discussed in the new reading. We want to make sure that we do not "waste" good practice questions that are still relevant to the current exam, as this gives our members more materials to learn from. I hope this helps!

Nicole

Hi @Nicole Seaman,

Thank you very much for your response. I understand the above applies to some of the contents which indeed seems similar (case from Stulz and Bodie for APT), but taking an specific scenario and based on your experience, for R3.P1.T1 which is Stulz, Risk Management and Risk-Taking in Banks, on the Apendix there's actually a note that mention 'we should consider that material as optional (Chapter 2 and Chapter 3), what should we infer on the 'Optional' piece.

Link to the study notes I refer to: https://learn.bionicturtle.com/topi...ulz-risk-taking-and-risk-management-by-banks/

Thank you very much!
-Roberto

 

[David Harper CFA FRM]

Hi @Roberto Hernández I think your specific instance (Stulz Chapters 2 & 3) happen to fall pretty much in line with Nicole's general comment about Appendices. Perhaps these Stulz are more optional; i.e., less helpful. They certainly are not necessary. Stulz text is interesting, I will be blunt if you don't mind ...

These two chapters (2 & 3) were in the FRM for several years, back to pretty much the beginning of the FRM. (Stulz is the chair of the FRM Committee, and he's a big deal in academic risk). In my humble opinion, having read the book many times over, the book's beginning is remarkably durable over time (the book is well over a decade old). I don't know where else exactly somebody spells out exactly why risk management should be able to add value precisely due to real-world violations in traditional finance theory. Chapter 2 is CAPM basically and sets up the theory that now appears elsewhere in the FRM (Elton in P1, Ang in P2), so that's relevant. Chapter 3 remains, to me, extremely robust. It basically says that risk management can add value due to realistic frictions (violations of rigid theory), including: in the real world financial distress has a cost; managerial incentives matter; not all shareholders are powerless price takers; and (yep!) taxes do matter. It took me literally years to appreciate the profound breadth of his assertions in Chapter 3. Will Chapter 3 be tested specifically? Nope, apparently not. Chapter 2 is overriden by newer content. So, in this sense, these truly are optional. Personally, I can't yet bring myself to delete them as Appendices because, you can see, i actually think they were in for a good reason (Chapter 3 really, but alas it is a continuation of Chapter 2). The problem with them, from my perspective and this certainly informed my feedback, is that they simply are not well written. Robust concepts, confusingly communicated. Without a doubt his style caused many candidates pain (see the Amazon reviews for just a hint). I hope that's not TMI. In summary: optional! I hope that's at least interesting, if not helpful ...

 

[Roberto Hernández]

Hi @David Harper CFA FRM, thank you for your response, definitely interesting and useful, it really helps to have a bit more clarity on the background. Also inherently I was referring to Chapter 3 which is as you mentioned confusingly communicated, sees to me as a lot of information was stacked and just written in each paragraph. Nonetheless and knowing what you mention I will just skim through it and if time allows come back to the chapter later on.

Thank you David!
-Roberto