Tutorial lessons
01 Foundations of Risk Management
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Tutorial lessons
FRM 1: The Building Blocks of Risk Management
What risk management is and how it differs from risk taking Stripped back to essentials, risk means that bad things might happen. Risk therefore deals in outcomes still ahead of us, and calling an out
FRM 2: How Do Firms Manage Financial Risk?
Why firms manage financial risk: the need and the opportunity Every company has always looked after the risks inside its own trade. Managers study what moves customer demand, keep more than one suppli
FRM 3 – The Governance of Risk Management
Why the 2007-2009 financial crisis changed risk governance and regulation Banks entered the 2007-2009 crisis with boards that approved strategies they could not describe, risk functions reporting to t
FRM 4: Credit Risk Transfer Mechanisms
What credit risk transfer is and why banks use it Lending defines a bank, and credit risk is what lending manufactures. Deposits arrive short-term and liquid, loans go out long-term and illiquid. Unti
FRM 5: Modern Portfolio Theory and the Capital Asset Pricing Model
What Modern Portfolio Theory says about risk and return Future market moves cannot be observed in advance, so measuring market risk means working through a model, and a model earns its keep by forecas
FRM 6: The Arbitrage Pricing Theory and Multifactor Models of Risk and Return
The Arbitrage Pricing Theory (APT): assumptions and how it compares to the CAPM Stephen Ross set out the Arbitrage Pricing Theory in 1976. Where the capital asset pricing model prices one source of ri
FRM 7: Principles for Effective Data Aggregation and Risk Reporting
What risk data aggregation means and why the Basel Committee published BCBS 239 Every risk number a firm produces rests on data that somebody collected, stored and passed along, which is why data belo
FRM 8: Enterprise Risk Management and Future Trends
What enterprise risk management (ERM) is and why firms need it Enterprise risk management, almost always shortened to ERM, brings the viewpoint and the resources at the top of a company to bear on the
FRM 9: Learning from Financial Disasters
Why financial disasters happen: risk factors that escalate into losses Every collapse gathered in this lesson began with an exposure that somebody had already decided was under control. The cases are
FRM 10: Anatomy of the Great Financial Crisis of 2007-2009
What the Great Financial Crisis of 2007-2009 was: timeline of major events The episode now called the Great Financial Crisis, or GFC, opened with a slump in the United States subprime mortgage market
FRM 11: GARP Code of Conduct
What the GARP Code of Conduct is and who it applies to The Global Association of Risk Professionals publishes a Code of Conduct, called simply the Code, setting out principles of professional conduct