Can't follow the math in FRM Handbook!! Am I doomed?

[mcarthur724]

I will be taking the FRM exam for Nov 2010 part 1. I purchased the FRM Handbook (Jorion) and started reading the first chapter on Quantitative Analysis this week. I was only able to get up to page 7 before being lost in the math. I have no CFA background and haven't used complex math since college 15 years ago so the math is going over my head. I have a CPA (which doesn't use complex math).

My question is whether my limited math knowledge will be a major hinder in passing the FRM exam?

The FRM Handbook seems to assume that the reader understands the math symbols and concepts, because it doesn't explain them. Does the exam require strong math skills, because based upon the Quant Analysis chapter of the FRM Handbook it appears that it does? If so, where do I turn for instruction that will help me to understand the equations? Do I need to go get a calculus textbook and try to learn it real quick, or will the BT webinars get basic enough to help me understand the complex equations? Or is there another source that would be helpful to me in understanding the math equations. Flipping through the FRM Handbook, it appears that the math will only get worse (since I have only made it up to page 7)!

Any advice would be great.

 

[T.Flockert]

I think there is enough time for you to get into the statistical concepts. I would recommend to get a good introduction to statistics (book).

The concepts used (in level 1) are in part sophisticated, but you don't have get deep into those topics. And those basic ideas are easy to understand, if you get used to the notation. And for most test-questions you just have to know the formulas by heart and do not need a deep understanding of all details related to it.

For example: if you know the formula for GARCH(1,1) you should be able to answer most questions related to that, without knowing the aplication of a Portmanteau test or something like that. Or... you don't need to get deep into matrix calculus in order to cover the regression-related topics.

Or in few words: not too hard, enough time --> don't worry

 

[David Harper CFA FRM]

cpaguy,

I totally agree with T.Flockhert. The FRM Handbook (IMO) awkwardly presumes some slightly-above-exam-level math. However, the calculus Jorion presumes pays plenty of dividends all the way to the end (L2); i.e., the first derivative is everywhere. So, for L1, I agree that you might "keep it simple" with a focus on basic math, formulas and the stat in Gujarati 1 to 8. But, thinking ahead to L2, I do also think that it's worth investing time is intro calculus so that you understand the first partial derivative.

I like your plan to sit L1 in November b/c you can give proper attention to (i) the statistics and (ii) hopefully, just calculus up to derivatives. But T.Flockhert is totally correct about L1: it is generally the application of math & formulas rather than any advanced math.

So, I would focus on Gujarati & Hull assignments in this respect. Doing Gujarati practice questions gives you most of the stat you'll need; and Hull gives you all the "bond math" practice you'll need (eg, variations on PV, FV, compounding)

Here are two links:
http://forum.bionicturtle.com/viewthread/2993/
http://www.bionicturtle.com/learn/article/additional_frm_reading_resources_book/; this contains two of my favorite calculus books but more recently i worked through a Humongous Book of Calculus Problems and I thought it was fun and very effective: see http://forum.bionicturtle.com/viewthread/2463/

David

 

[mcarthur724]

Thanks for the reply T Flockert and David. I have found started going through your Early Bird webinars and have found them very helpful to brush-up on the math and help the concepts that I learned back in college come back to mind. On behalf of everyone who is in a similar situation as me of being rusty on their math skills, thank you very much for doing the Early Bird webinars!

 

[David Harper CFA FRM]

cpaguy7 -

I am thrilled you find them helpful.
Can i ask a question: do you think math refresher webinar(s) would be helpful, for example, in June/July, as precursor to Nov 2010 (i.e., after the May 22nd exam)?
... since we didn't get the #2 webinar recorded, I'd be happy to develop an improved quant introduction, if there is demand? Thanks, David

 

[David Harper CFA FRM]

cpaguy - re the math, please see http://forum.bionicturtle.com/viewthread/2997/

... I totally forgot about Carol Alexander's Volume I which, IMO, is the best intro to quant finance book. The only caveat is that it is not a greatly gentle introduction (e.g., the linear algebra presumes some prior understanding), it's more like a suprisingly dense intro survey that achieves more than much bigger books ...David

 

[mcarthur724]

Yes, that would be great if you could do an intro to quant webinar! Since I have found the other Early Birds to be so helpful, I was very disappointed that EB webinar #2 did not get recorded. I'm sure there are many others who would also benefit greatly from a quant intro. Thanks!

 

[David Harper CFA FRM]

cpaguy - Thank you for your feedback! Suzanne and i just tentatively agreed that we can conduct two (2) quant intro webinars after the L1 exam (e.g., June, July) as this will still allow for two L1 webinars and two L2 webinars before November .... (I am always interested to make the intros better and more efficient) ... when we lost #2, we were still learning the issues related to live (many things can go wrong), but I think we've figured it out now...thanks, David

 

[mcarthur724]

Great to hear! I also just ordered Carol Alexander's volume 1 that you recommended. Thanks again.

 

[williamhsu]

Hi David
I totally forget partial derivative that I learned in college. What is the quick way to learn those concept for FRM exam. Thanks for all helps
William

 

[David Harper CFA FRM]

Hi William,

I think youtube is quickest, these are my two favorite calculus teachers (i have other sources for in-depth treatments ... but youtube is fastest, imo):

• http://integralcalc.com/ Krista's youtube channel @ https://www.youtube.com/user/TheIntegralCALC
• http://www.mathtv.com/videos_by_topic

Thanks,