FRM Level 2 November 2025 Study Strategy: How to Tackle Case-Based Questions

Kateryna Myrko
Oct 6
4 min read

FRM Level 2 Study Strategy: How to Tackle Case-Based Questions

FRM® Part II is built around case-based (vignette) questions that test whether you can apply risk concepts in context—not just recall formulas. Winning here requires a structured reading approach, an execution playbook, and domain-specific checklists. Use the strategy below to turn dense vignettes into points, consistently.

1) Understand the vignette game FRM Level 2 November 2025 Study Strategy

What you’ll face: A scenario (bank/asset manager/insurance/corporate) followed by several questions sharing the same data. The first minute you spend organizing the case pays off across every question. FRM Level 2 November 2025 Study Strategy

Core objectives per case

Identify the decision maker (CRO, desk head, board) and their constraints (capital, liquidity, policy limits).
Tag the risk types present: market, credit, liquidity/treasury, operational/resiliency, investment/portfolio, or “current issues.”
Extract givens (numbers, assumptions, data tables) and define unknowns.

Your scratch layout (fast and repeatable)

Top: a 3–5 bullet “situation summary.”
Left column: variables and units (e.g., PD 1.5%, LGD 40%, horizon 10d).
Right column: formulas or steps you’ll need (e.g., EL = PD×LGD×EAD; IR = IC×√BR).

2) Timing you can trust

You have 80 questions in 4 hours—about 3 minutes/question. Cases amortize reading time, so aim for:

Read & frame the vignette: 2–3 minutes
Per question: 2.5–3.5 minutes (some faster, some slower)
Buffer: 10–15 minutes for a final pass

Triage rule: If you’re ~90 seconds into a calculation with no traction, mark, guess after eliminating two options, move on, and reclaim later.

3) A five-step method for every case

Frame: Who decides what, under which constraint? What’s the horizon and confidence level?
Map: Link each paragraph to a risk concept (e.g., “P&L vector → VaR method,” “migration matrix → credit VaR”).
Select: Choose the simplest appropriate method (don’t over-engineer).
Compute/Argue: Do the math or make the policy judgment using the stated assumptions.
Sanity-check: Direction, order of magnitude, and units. If the output surprises you, revisit steps or signs.

4) Domain trigger checklists (Part II focus)

Market Risk Measurement & Management

Which VaR? Delta-normal vs. historical vs. Monte Carlo; liquidity horizons and ES if referenced.
Backtesting (exceptions, Kupiec), stress testing design, and model risk controls.
Greeks & mapping (options/structured notes), basis and curve risks.Quick checks: Annualization vs. de-annualization, correlation vs. covariance, fat tails (Cornish-Fisher?).

Credit Risk Measurement & Management

EL/UL (PD, LGD, EAD), credit VaR, maturity adjustment, concentration measures (H-index, Gini).
Migration matrices, default correlation, portfolio granularity.
Counterparty credit risk (EE, EPE, PFE), collateral/CSA effects, wrong-way risk.Quick checks: PD in decimal vs percent; LGD vs recovery; netting/ collateral impacts on EAD.

Operational Risk & Resiliency

LDA vs. scenario analysis, combining data sources, dependence modeling.
Controls/KRIs, RCSA, cyber and third-party risk, resilience (BCP/DR, impact tolerances).Quick checks: Loss thresholds, tail quantiles, diversification assumptions.

Liquidity & Treasury Risk

Funding vs. market liquidity, LCR/NSFR mechanics, HQLA levels, intraday liquidity.
FTP (funds transfer pricing), contingency funding plans, roll-over risk.Quick checks: Haircuts, runoff rates, time-bucket consistency.

Risk Management & Investment Management

Active risk (tracking error), IR = IC×√BR, risk budgeting, constraints (TE bands).
Factor models (beta, active weights, exposures), performance attribution (allocation vs. selection).Quick checks: Arithmetic vs. geometric returns, benchmark alignment, long/short signs.

Current Issues in Financial Markets

Tie the vignette to policy regimes, regulation, climate or model risk themes. Answer with principles and a clear risk-governance lens.

5) Case math under pressure: avoid the classic traps

Units & basis points: 75 bps = 0.0075. Never mix day-count conventions or horizons.
Signs: In P&L vectors or carry/roll-down, predict direction before calculating.
Scaling: VaR time scaling (√t) only under iid/normal assumptions—don’t auto-apply.
Averages: For exposure profiles, check if the question wants point-in-time (EE) or average (EPE).

6) Practice that mirrors the exam

Block practice by case, not by loose questions. When you study market risk, build 3–5 mini-vignettes mixing VaR choice, backtesting, and stress design. For credit, mix EL/UL with a small counterparty exposure table and a CSA twist.

Deliberate review protocol

Miss taxonomy: concept error, process error, or careless (units/sign).
Rewrite the fix: one line of principle + the corrected step.

Mock cadence (last 4–6 weeks)

2–3 full mocks, each followed by a review that’s 2× as long as the mock.
Track: total score, avg time/question, top three recurring error themes, and your “auto-pilot” formulas.

7) Writing and reasoning for policy questions

Case-based items often ask “best action” or “most appropriate control.” Use a mini-framework:

Objective (what are we protecting or optimizing?)
Constraint (capital, liquidity, policy, regulation)
Risk-technique fit (why this method/control beats the alternatives for this case)
Downside (what residual risk or cost remains?)

This keeps answers grounded, not generic.

8) Exam-day execution

First pass: Harvest the quick points; don’t let a single heavy calc break your pace.
Bookmark & batch: Group marked items by type (e.g., “two quick ELs” or “two policy picks”) for efficient returns.
Final sweep: Sanity-check numbers, units, and that you submitted every response.

9) One-page formula & concept map (build it yourself)

Your final condense should fit on one sheet:

Market: VaR/ES relationships, backtesting stats, mapping tips.
Credit: EL/UL, migration logic, CCR measures.
Liquidity/Treasury: LCR/NSFR skeleton, FTP outline.
OpRisk: LDA components, scenario aggregation.
Inv Mgmt: IR/TE, factor model identities, attribution blocks.

If it doesn’t fit, you haven’t distilled enough.

Part II rewards contextual judgment backed by clean mechanics. Read vignettes with intent, map them to the right risk tools, execute with unit-safe math, and justify choices through objectives and constraints. Practice in case format, review with a miss taxonomy, and arrive with a repeatable method. That’s how you turn complex cases into confident, first-attempt passes.

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