A Review of PRM Handbook

The Professional Risk Manager (PRM) exam is one of the most prestigious risk management exams offered by PRMIA, the Professional Risk Manager’s International Association.

It’s 4-part exam which can be given in any Pearson Vue testing centre. Every year PRMIA publishes the syllabus and guidelines for all the four parts of the exam. As a part of the exam preparation, PRMIA offers PRM handbook as the official handbook that the students can use to prepare for the exam. The handbook is also divided into three parts with each part related to one exam.

Part 1: Finance Theory, Financial Instruments and Markets

Part 2: Mathematical Foundations of Risk Measurement

Part 3: Risk Management Practices

The fourth exam is related to case studies, best practices, and PRMIA standard, which are not a part of the PRM handbook. You can download the detailed table of content for PRM Handbook.

You can buy the handbook either directly from PRMIA or you can also buy the PRM handbook from Amazon.

Now let’s talk about how useful PRM handbook is to prepare for the exam. Personally I found the handbook a bit difficult to follow for the exam perspective. It’s not been written from a student’s perspective but from a practitioner’s perspective. The problem with this approach is that the book assumes that you already know a lot about financial markets, risk and other concepts and works at a slightly advanced level. It is also more mathematical than what the exam requires. For example, there are references to detailed mathematical equations which are not always a part of the exam. Where ever applicable the handbook makes it clear that these are not going to be tested in the exam, but it ends up overwhelming the user. So, I would say that if you have already been into financial markets and/or risk management for some time, you will be able to use this book effectively for exam prep. If not, you are going to find this one difficult.

There is one more important observation I would like to make, especially about the PRM mathematics section. The handbook covers in detail the mathematics section including the foundations, probability, calculus, statistics, linear algebra, regression, etc. In the exam, you are more likely to be asked questions testing you on the application of these concepts in finance. So, knowing just pure maths is not enough. The PRM handbook does a good job of this. As an example, while teaching calculus, the handbook first covers all the rules of calculus, and then applies these rules and principles to finance concepts such as duration, convexity, delta, and gamma calculations. So, you can study calculus theory from anywhere, but from the exam perspective, these finance applications is what you need to know.

All the best for the exam!