The FRM® Edge

New reading under Foundations of Risk Management. Covers physical risk (extreme weather, sea-level rise), transition risk (policy, technology, stranded assets), and TCFD disclosure framework as applied to financial institutions.

New readings on supervised learning (regression trees, random forests) and unsupervised learning (clustering) for credit scoring and anomaly detection. Replaces older sections on linear regression extensions.

New section on cryptocurrency markets, stablecoins, and DeFi protocols as financial products. LIBOR-based derivative pricing replaced with SOFR and OIS discounting throughout all numerical examples.

VaR methodologies updated; Expected Shortfall (ES) calculations now primary measure in line with Basel IV IMA requirements. New LOS on backtesting and model validation procedures under the revised framework.

Reflects expanded scope including corporate governance of risk, risk culture, and the newly added climate risk reading. Candidates should allocate proportionally more preparation time to this book.

Comprehensive update covering the Fundamental Review of the Trading Book (FRTB). Both Internal Models Approach (IMA) and Standardised Approach (SA) are now fully examinable. P&L attribution tests, non-modellable risk factors, and desk-level model approval introduced.

New reading under Credit Risk covering the unique risk characteristics of private credit: illiquidity premium, covenant analysis, recovery rate modelling, and portfolio concentration risk in direct lending books.

Operational risk capital calculation updated to Basel IV Standardised Approach replacing the older AMA framework. New readings on Cyber Risk governance, incident classification, and DORA (EU Digital Operational Resilience Act) compliance.

New reading under Liquidity & Treasury Risk on Central Bank Digital Currencies and their systemic implications — potential bank disintermediation, intraday liquidity management, and central bank settlement infrastructure changes.

Entire section rewritten annually by GARP. This cycle covers: AI and model risk governance, crypto asset regulation (MiCA, SEC enforcement), climate stress testing at banks (EBA/Fed scenarios), and DORA operational resilience requirements.