Required to differentiate/integrate equations in the exam?

[S666]

I was just wondering if we would be required to differentiate/integrate equations in the FRM exam (particularly part 1).

I vaguely remember the basics from my university days but that was 16 years ago and most of the rules have slipped from memory.

I see it used in the BT practice questions for various topics - for example finding the individual weights to place in each of 2 assets to find the 2 asset minimum variance portfolio. Or differentiating/integrating probability distribution functions.

I would rather not have to relearn the differentiation/integration rules if needs be as I understand the theory behind it - just not the actual practice at this point in time.

Any info much appreciated

 

[David Harper CFA FRM]

Hi @S666 The answer is, no, so far the FRM exam has not required any direct differentiation/integration. I say direct because first partial derivatives are common in the FRM; e.g., delta is a first partial derivative, dollar duration, marginal VaR. I've always said that a familiarity with first partial derivatives is helpful (and, in practice, the power rule seems to handle an unfair number of cases! https://en.wikipedia.org/wiki/Power_rule). You are correct about my questions. When the FRM introduced Miller's text into the quantitative section, I duly included his calculus; however, they have yet to directly queries those applications. I hope that helps!

 

[S666]

Many thanks for the info - I appreciate it may be useful (for real life outside the FRM exam) to relearn the basic rules...if I have time I'll definitely revise the power rule as you suggest that may be decent bang for my buck.

 

[bpdulog]

Thank you David for the reference!

 

[Sixcarbs]

Hi @S666 The answer is, no, so far the FRM exam has not required any direct differentiation/integration. I say direct because first partial derivatives are common in the FRM; e.g., delta is a first partial derivative, dollar duration, marginal VaR. I've always said that a familiarity with first partial derivatives is helpful (and, in practice, the power rule seems to handle an unfair number of cases! https://en.wikipedia.org/wiki/Power_rule). You are correct about my questions. When the FRM introduced Miller's text into the quantitative section, I duly included his calculus; however, they have yet to directly queries those applications. I hope that helps!

Hi Professsor,

Is the answer still no in 2019 or have they added differentiation and integration on the exam since 2015?

Thanks,

Sixcarbs

 

[David Harper CFA FRM]

Hi @Sixcarbs The answer is still "no" in 2019. More exactly, last year I clarified with Bill May at GARP and shared his reply here https://forum.bionicturtle.com/thre...to-know-calculus-for-the-frm.13435/post-57562 where he wrote (emphasis is mine):

... 2) Specifically regarding calculus, the FRM Exam does not explicitly require an understanding of calculus and, as a perusal of the learning objectives will indicate, does not test directly on differentiation, integration, or other aspects of calculus. That being said, an understanding of calculus, not to mention matrix manipulation that is typically associated with linear algebra, would likely prove beneficial to candidates as they prepare for the Exam. Many of tools and techniques related to probability, statistics, modelling, and estimation draw on these concepts and the better candidates understand these topics the better prepared they are likely to be.

... the above is a paragraph from a longer correspondence:

Last year I explicitly asked Bill May, SVP GARP who basically oversees the FRM, specifically about the role of calculus. Here is that email exchange (emphasis mine):

Subject: Common question asked about P1.T2. Quantitative Methods (Miller)

Hi Bill,

Does GARP have any "official guidance" on the role of calculus in the actual exam?
Especially because the Miller reading utilizes (basic) calculus, we are often asked "Do I need to know any calculus?"

fwiw, i typically explain that from a practical standpoint, time limitations preclude the tedium implied by (eg) differentiating or integrating and, further, the historical record of questions generally does not DIRECTLY query calculus, but that an understanding of basic calculus is recommended. For example, it's very helpful to understand that a distributional pdf integrates to its CDF. Thanks for any insight! Cheers, David

Bill May replied:

David,

This is a not uncommon question for us as well. Let me respond in two parts:

1)The FRM Candidate Guide describes the general quantitative level of the Exam thusly:

Q. How quantitative is the FRM Exam?

A. The FRM Exam has a quantitative component, but these quantitative concepts are presented in the context of questions that approximate real-world situations that risk managers would face. The level of mathematical rigor of the FRM Exam is consistent with an advanced undergraduate or introductory graduate level finance course at most universities.

2) Specifically regarding calculus, the FRM Exam does not explicitly require an understanding of calculus and, as a perusal of the learning objectives will indicate, does not test directly on differentiation, integration, or other aspects of calculus. That being said, an understanding of calculus, not to mention matrix manipulation that is typically associated with linear algebra, would likely prove beneficial to candidates as they prepare for the Exam. Many of tools and techniques related to probability, statistics, modelling, and estimation draw on these concepts and the better candidates understand these topics the better prepared they are likely to be.

I hope that helps.

Bill

 

[Sixcarbs]

Thank you. That's great information right from the source!

 

[TariqA7]

Hi Professsor,

Is the answer still no in 2019 or have they added differentiation and integration on the exam since 2015?

Thanks,

Sixcarbs

Hi @David Harper CFA FRM ,

retweeting the above, is the answer still no in 2024?

thanks

 

[Clay Carter]

@TariqA7 To this time period I have not seen differentiation or integration on the exam.