All About PRM Exam III

We have already talked about the PRM Exam I and PRM Exam II. In PRM Exam I, the focus was to build the foundation of finance theory, financial instruments, and financial markets. In PRM Exam II, the focus was on building the mathematical foundations of risk measurement.

PRM Exam III is at the heart of the PRM certification, and this is where your knowledge of risk management practices is tested. The exam curriculum revolves around the three major categories of risks, namely, credit risk, market risk, and operational risk.

Exam Format

The PRM Level III exam is a multiple-choice exam. There are total 36 questions to be answered in 1.5 hours time. The questions will be both concept and number based.

PRM Exam III Waiver

PRM Exam is an essential exam and there are no waivers for Exam III even if you have any other financial certification.

PRM Exam III Curriculum

The PRM Exam III curriculum focuses on the following topics:

TopicWeightNo. of Questions
Market Risk33%12
Credit Risk33%12
Operational Risk33%12

All the three sections are given equal weight. As you go through the exam syllabus, you will understand the different kinds of risk faced by bankers, fund managers and corporate treasurers, and how these risks are calculated and managed by the risk managers. Let’s look at each section in more detail.

Market Risk: This section focuses on the concept of market risk, market risk management framework, value-at risk models to quantify market risk, and other advanced concepts such as risk decomposition. You will also learn about stress testing, model risk, and liquidity risk management.

Credit Risk: This section discusses the concept of credit risk, tools and techniques for managing credit risk, credit risk modeling, and calculation of credit risk capital.

Operational Risk: This section discusses the operational risk management framework, operational risk models, operational value-at-risk, enterprise information risk, and systemic risk.

You will also learn about the Basel guidelines for capital adequacy, and other important concepts. The exam also has a section devoted to the recent financial crisis and the lessons learned from it.

PRMIA provides the official PRM Handbook that’s a great resource to prepare for the PRM exam. You can also use Finance Train’s free online material for the PRM Exam.

If you have any questions about the exam, please feel free to ask in the comments section below and I’ll be glad to answer.