Not Taking the FRM Exam

[Simon]

Hi,

I am not planning to take the FRM exam, but want to learn more about risk analysis to help me make better investment decisions. I was wondering what people thought about signing up for the Bionic Turtle just as a tool to learn more about risk analysis. Another possibility would be going through Carol Alexander’s four book set that David has mentioned on this site. Has anyone signed up for Bionic Turtle just to learn abour risk? If so, how is that going? Has anyone actually read any of Carol Alexander’s books? Any good? David seems to highly recommend them.

thanks for your thoughts,
Simon

 

[David Harper CFA FRM]

Hi Simon,

I am biased but interested, too, in your question. I know we've had a few non-FRM customers over the years but I don't think a lot. FWIW, we follow the GARP FRM AIMs so I'd almost argue your questions begs "do you want to learn the FRM AIMs" (we can't publish them wholesale but please write .(JavaScript must be enabled to view this email address) for documents that convey same, if you don't have access).

Candidly, as much as I think it is great learning, the FRM is not quite the risk curriculum that I would design ... IMO, its strength is a strong quantitative introduction by way of world class authors but its weaknesses are: (1) still incoherent and no less so with intro of L1 + L2 (too much overlap; too much definitional inconsistency; (2) leaves many real-world practitioners hungry for more practical applications (e.g., the PRM is better on case studies: http://prmia.org/index.php?page=exam&option=trainingWebBasedResource), as certification exams often do ... I assume you are aware of http://www.prmia.org) ... this current FRM lingers, i think, maybe too long on traditional finance like mean-variance, I know this has frustrated experienced practioners

I am excited to say: since December, we've been working with a small team to deploy our site re-launch (immediately after L1 exam) which aspires to offer a broader set of risk- and career-related resources, so please stay tuned for that...

Did you know Carol Alexander has a forum associated with her books: http://www.carolalexander.org/phpBB/index.php
...some of us Carol fans await her creation of a certification/program from these books alas the petition is still circulating

good luck, thanks for visiting! David

 

[Simon]

Thanks for the reply David. There seems to be a lot of overlap between some of the books you recommend and the FRM material. For example, I own Intro to Econometrics using Excel and Monte Carlo and it seems like the topics covered in that book are amlost identical to the FRM readings in econometrics. Could you please elaborate on the differences? Is the FRM material deeper / more advanced? Another book I own that you mentiond is Credit Risk Analysis using Excel VBA, but have found the math/stats in that book to be difficult to follow. Would going through the FRM material prepare me to really understand that book? If not, what would? Also, what risk software do you recommend? I have been using @Risk on the job, but have recently switched to using Vose's ModelRisk, which I think is the best risk software on the market for those of us that primarly use Excel (http://www.vosesoftware.com/). It's the only sofware I know of that includes time series in an Excel environment. I highly recommend it. You mentioned Chris Brooks' Intro to Econometrics for Finance, but that books relies on EViews software. If you don't want to buy EViews, do you still recommend Brooks? Thanks again for your help and your suggestions. This is a great site for those who want to learn more about Risk Analysis.

Simon

 

[David Harper CFA FRM]

Hi Simon,

I am a fan of Introductory Econometrics: Using Monte Carlo Simulation with Microsoft Excel by Barreto and Howland and, having used it for some intro webinars, have recommended it. Key difference, IMO, from FRM is that it gives a much deeper understanding of OLS regression than is required for FRM (so, when the goal is to "pass the test" and time is short, I don't recommend. But if goal is to get hands-on understanding, I think it's great for that).

Re Credit risk analysis using VBA, I worked thru that years ago: I generally do not think FRM would be great prep to understand the book (the FRM would not give you the detail you need; e.g., default intensity models); instead, reading the book would give you deeper insight into some FRM topics that are treated superficially.

Thank you for the VOSE recommendation, I was not aware but am interested to learn more about!

Re software, I am not good for institutional recommendation, I am learning mathematica and i have @RISK but don't get much chance to use...

Re: Chris Brooks' book: i worked that with eViews, I think it's a great book, I still refer to it often (eg, GARCH) but i do tend to think it wants you to have eViews to get the full benefit...

(thanks for liking the site!)

David

 

[Simon]

Thanks for the color on those books David. If you have @Risk, then you should download ModelAssist from the Vose Consulting web site (http://www.voseconsulting.com/install_modelassist_risk.htm). It's free and the help file is amazing. It's like a full course on risk modeling. I hope you enjoy it and you can't beat the price.

Simon

 

[chad007]

Hi David:

If the objective was to simply get a job as a risk analyst (market or risk or operational) and not necessarily attempt the FRM exam, then what texts in the FRM are relevant? As you indicated there is a lot of overlap in concepts and terminology in the core readings and I am sure a lot of the subject matter in the core readings are probably not directly relevant to the risk practitioner. You mentioned in a previous post that Carol Alexander's books were very relevant the practitioner. Just wondering what assigned core readings are similarly relevant for either getting a risk job or getting better if already in the field.

Thanks

 

[David Harper CFA FRM]

Hi Chad,

I definitely think Carol's books are more relevant to a practitioner, if for no other reason then they are abundant in case study exercises utilizing concrete techniques.

It's really hard to answer your question. This is just my opinion, but i don't think practitioner relevance is a strength generally of the FRM. I think it informs the basic quantitative toolset and prepares you with the "language of risk" but for each category (market, credit, operational, ERM), i doubt practitioners reach for these assignments. For most of the topics (e.g., counterparty risk), there are simply more modern, deeper treatments elsewhere. Some of the topics are deficient from a practical standpoint: e.g., ERM is given a wholly academic, non-practical treatment

Texts i might favor from a practical standpoint: Dowd market risk (but I know many find this completely academic, so I know some who would totally disagree about Dowd, so already i am lost!); Fabozzi (is still relevant-yes?); the cases (both subprime and Deutsche Bank LDA); several of the current readings (incl. Gary Gorton: i recommended him to GARP before he was introduced, they ended up including his simplest paper, but he published better, deeper stuff. He just released a book http://www.amazon.com/Slapped-Invisible-Hand-Management-Association/dp/0199734151/ ... but, you can see, even it's not really a practitioner text per se) ... just some thoughts, i have a hard time defending a subset as relevant to a practitioner. Sorry. We are working on some such resources for the site re-launch.

David