FRM Study Guide 2026
Everything you need to pass the FRM exam in one place: the exam format, every topic to study, real practice questions with explanations, flashcards, and full-length practice tests. Free, no sign-up needed.
📋 FRM Exam Format at a Glance
📚 FRM Topics to Study (35)
✍️ Sample FRM Questions & Answers
1. What is a short squeeze?
When a heavily shorted asset's price rises, short sellers rush to buy back (cover) their positions to limit losses, which further drives up the price in a feedback loop.
2. Expected Shortfall (ES) is considered superior to VaR primarily because:
ES captures the average severity of tail losses beyond the VaR cutoff and satisfies sub-additivity, meaning portfolio ES ≤ sum of individual ESs, unlike VaR.
3. What is the value of industry certifications?
Certifications provide third-party validation of your knowledge and skills, showing employers and clients that you meet recognized professional standards.
4. A risk review identifies that a strategy has negative skew and positive carry. What is the typical hidden danger?
Negative-skew carry strategies often earn small steady profits but are exposed to infrequent severe losses.
5. Under Basel III, what is the standard multiplier applied to the 10-day 99% VaR for market risk capital requirements?
Basel III requires banks to hold capital equal to at least 3 times the 10-day 99% VaR, subject to supervisory add-ons for backtesting exceptions.
6. In the context of options, what does 'delta hedging' involve?
Delta hedging involves taking an offsetting position in the underlying asset equal to the option's delta, which must be rebalanced as the delta changes.