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FRM · Study overlap

FRM Part 1 vs Part 2: what carries forward?

Part I develops the tools; Part II applies them to market, credit, operational, liquidity and investment risk. Carry probability, valuation and product mechanics forward, then add model challenge, funding and risk-management decisions. Part II requires new material, not just a repeat of Part I.

The difference at a glance

  • 01Questions and time

    Part I: 100 MCQs in 4 hours

    Part II: 80 MCQs in 4 hours

  • 02Average pace

    Part I: 2.4 minutes per question

    Part II: 3 minutes per question

  • 03Study task

    Part I: Learn tools, products, valuation and core risk concepts.

    Part II: Apply tools, challenge assumptions and choose a risk response.

  • 04What is new?

    Part I: The foundation for later applied cases.

    Part II: Deeper domain applications and the exam-year Current Issues readings.

Average pace is calculated from those totals, not a required time limit per item.

Your Part I to Part II bridge

Use these links to test whether you can apply a familiar tool to a new decision. This is a suggested study map, not an official prerequisite checklist.

  • Connection 1

    Probability and regression

    Market-risk model assessment

    Interpret exception counts, time dependence and model limitations.

    Try the worked method

  • Connection 2

    Bonds, derivatives and valuation

    Credit and counterparty exposure

    Move from contract value to exposure, default dependence and CVA.

    Try the worked method

  • Connection 3

    Products and collateral mechanics

    Liquidity and treasury risk

    Calculate cash gaps when margin or collateral haircuts change.

    Try the worked method

  • Connection 4

    Governance and risk types

    Operational resilience

    Evaluate control ownership, critical dependencies and recovery evidence.

    Try the worked method

  • Connection 5

    Portfolio covariance

    Investment portfolio risk

    Distinguish total volatility from benchmark-relative risk.

    Try the worked method

  • Connection 6

    All foundational tools

    Current Issues reading integration

    Apply prescribed papers to a risk mechanism and identify limits to the evidence.

    Try the worked method

A practical transition sequence

  1. 1. Diagnose

    Rework one probability, valuation and product-payoff case. Record the exact assumption or calculation you cannot explain.

  2. 2. Repair and apply

    Review that Part I method, then apply it to the matching Part II case. Check exposure, horizon, data and the decision being made.

  3. 3. Integrate

    Combine a market move with a credit or funding effect. Add the prescribed Current Issues reading and explain the evidence behind your response.

How much of Part II is repeated material?

There is no verified percentage of repeated content in this guide. Shared concepts do not imply identical readings or questions. The map above identifies dependencies to make review more targeted. Use GARP’s learning objectives for your exam year to check the required material, especially Current Issues.

Should I relearn all of Part I before Part II?

Use a diagnostic first. If you can calculate and explain a method under changed assumptions, move to its application. If you remember only a formula, repair that gap before adding the Part II decision. This is a suggested learning approach, not evidence that a fixed review period guarantees readiness.

Work through the topic

Use three diagnostics to decide what to carry forward, what to repair and what to learn next. This transition exercise is a study aid, not an official readiness score.

Understand how a familiar tool becomes a different task

Part I builds a language for probability, products, valuation and risk. Part II requires using that language within deeper market, credit, operational, liquidity and investment-risk problems. The distinction is useful for planning, but it is not absolute: Part I includes interpretation and Part II still requires calculations. Avoid dividing the exams into a purely mathematical first part and a purely qualitative second part.

The study bridge is a dependency map. Bond duration supports market-risk scenarios; conditional probability supports credit and model assessment; derivative mechanics support counterparty exposure and collateral analysis. A familiar formula can appear in a new setting where the difficult step is selecting the right exposure, horizon or management response. Recalling the formula is therefore necessary in some cases but insufficient for the full application.

There is no verified repeated-content percentage in this guide. A shared term does not prove that the reading, learning objective or question is repeated. Use the official objectives for the relevant exam year to establish required coverage. Use the diagnostics below to identify learning gaps within that scope, without treating a short exercise as evidence that the entire part has been mastered.

Try three bridges from calculation to interpretation

First, take a bond portfolio worth 5 million with modified duration 3 and assume a 50 bp parallel yield increase. The first-order change is -5 million × 3 × 0.005 = -75,000. Explaining the sign and basis-point conversion tests the foundational calculation. Then ask whether this result also establishes the cash needed tomorrow. It does not: collateral terms, funding obligations and sale settlement are separate inputs.

Second, suppose a 99% one-day VaR model is backtested over 200 days. Under independent trials with the stated exception probability, the expected count is 200 × 0.01 = 2. Observing two exceptions does not prove the model is correct. You still need consistent outcomes, the timing and severity of exceptions, and evidence about omitted risks. The calculation carries forward; the model-assessment task adds new reasoning.

Third, a derivative netting set has positive value of 1.2 million and 0.9 million of eligible collateral under the supplied terms. Simplified current unsecured exposure is 0.3 million. Now ask whether future exposure is also fixed at 0.3 million. Market moves, collateral timing, thresholds and close-out conditions can change it. This is the bridge from contract valuation to counterparty-risk analysis.

Original transition diagnostics with answer checkpoints

Duration approximation
Answer checkpoint: Loss ≈ 75,000; yield change 0.005
Part II question to add: What cash consequences follow from the scenario?
Expected exception count
Answer checkpoint: 200 × 1% = 2
Part II question to add: Are coverage and exception timing consistent with the model?
Current unsecured exposure
Answer checkpoint: 1.2 million - 0.9 million = 0.3 million
Part II question to add: How can exposure and collateral change before close-out?

Build the review sequence from the error you actually make

If the calculation fails, identify the smallest missing prerequisite: decimal conversion, discounting, a sign convention, probability conditioning or a contract payoff. Rework that method with changed numbers and explain each step aloud or in writing. Repeating an entire topic without identifying the error can spend time on material already understood while leaving the same weakness intact.

If the calculation succeeds but the interpretation fails, practice selecting the measure and stating its limits. Ask what the number measures, which assumptions it needs and what decision it cannot settle. Then move to the linked Part II application and write a short recommendation that uses the result. This tests whether the method is available for reasoning rather than only for recognition.

If both calculation and interpretation succeed, move to mixed cases and the prescribed Current Issues readings while continuing targeted retrieval practice. Record mistakes by mechanism, such as confusing a funding transfer with a loss or a cumulative probability with an interval probability. Review that error log when choosing the next case. Progress should follow demonstrated understanding, not an invented universal number of review days.

Suggested study response to a diagnostic result

Formula or units are wrong
Immediate review task: Rebuild the Part I calculation
Evidence to move forward: Correct result under changed inputs, with units
Number is right, meaning is wrong
Immediate review task: Explain assumptions and limitations
Evidence to move forward: Correctly distinguish value, loss and cash need
Interpretation is sound, decision is weak
Immediate review task: Work a Part II application
Evidence to move forward: Feasible response with an owner and residual risk
Case answer lacks support
Immediate review task: Return to the prescribed reading
Evidence to move forward: Traceable claim, mechanism and limitation

Does the longer average time per Part II question make it easier?

The published format gives an arithmetic average of three minutes per Part II question, compared with 2.4 minutes for Part I. That does not establish relative difficulty or guarantee enough time for every item. Practice pacing with material representative of the part and reserve time for review.

Which PDF should I use for this transition?

The free bundle offered on this page contains separate Part I and Part II samples. Use a Part I sample to check a foundation and a Part II sample to inspect the application style. These mixed-topic samples are not a complete diagnostic exam or a topic-specific worksheet for every bridge above.

Sources and scope

Links checked 2026-10-10. GARP establishes exam scope; the technical references support the methods identified below. These are selected study notes and original examples, not complete curriculum coverage or official exam questions.

Prepared by MiloPrep editorial team. MiloPrep is independent of GARP. References do not imply endorsement or independent review of these notes.