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MARKET, LIQUIDITY AND

ASSET LIABILITY MANAGEMENT


RISK MANAGER CERTIFICATE
CANDIDATE GUIDEBOOK

The Industry Standard for Market Risk Practitioners


EXECUTIVE SUMMARY
PRMIA Market, Liquidity and Asset Liability Management Risk
Manager Certificate (MLARM) is designed to deliver a deep,
practical understanding of these areas of market and liquidity
risk management, their frameworks, and various measurement
methodologies in financial institutions.  Successful candidates
will be better prepared to implement the processes, procedures
and policies around these areas, as well as gain a deep overview
of the related tools and techniques.

The Market, Liquidity and Asset Liability Management Risk Manager Certificate exam consists
of 60 questions. The syllabus is based on the PRMIA Market, Liquidity and Asset Liability
Management Risk Manager Handbook.

Registration for the exam is via the PRMIA website, and taking the exam is designed to suit the
needs of the busy risk professional. Be sure to read this entire document to view important
information that will help you to be a successful candidate.

We hope that you will join us in promoting the MLARM program as the standard for our
industry and that you will join in our efforts to ensure that it will continue to meet the needs
of our members and our industry.

CONTENTS
1 EXECUTIVE SUMMARY
2 PROGRAM DESIGN
2 PROGRAM DATES
AND LOCATIONS
3 FEES AND REGISTRATION
3 TAKING THE MLARM EXAM
5 MLARM SYLLABUS
6 PREPARING FOR THE
MLARM EXAM
PROGRAM DESIGN
KEY LEARNING OBJECTIVES
DESIGN RATIONALE The key learning objectives of the Market, Liquidity
The Market, Liquidity and Asset Liability Management and Asset Liability Management Risk Manager
Risk Manager Certificate program was created at Certificate are to:
the instigation of PRMIA members holding senior ■ Gain an appreciation for the role of Market Risk,
positions in the industry who felt there was a gap in Liquidity Risk and Asset Liability Management in
the market. It has been designed by industry leaders, a post-crisis financial services industry
all PRMIA members. ■ Understand and apply the underlying principles
of Market Risk
The Market, Liquidity and Asset Liability Management
Risk Manager Certificate is relevant to all risk-related ■ Describe the elements of Market Risk Governance
roles in financial services, in particular Market Risk and the benefits of such an approach
Staff, Treasury Staff, Financial Controllers and those ■ Gain an understanding of Market Risk
managing the balance sheet, Technology Managers, Measurement and Management
and Compliance and Legal Officers. Also, a grounding ■ Gain an understanding of Market Risk in the Trading
in Market, Liquidity and Asset Liability Management Book with a focus on the Business-Specific Context
techniques is becoming increasingly important for ■ Describe the elements of Commodities Market
front line staff from a process perspective in their Risk Management approaches
dealings with clients and market counterparts. ■ Gain an understanding of Market Risk Stress
Testing and its renewed importance after the
The Market, Liquidity and Asset Liability Management recent crisis
Risk Manager Handbook is a best practices guide to all ■ Understand and apply the underlying principle
elements needed for the successful implementation of Asset Liability Management
of an approach to managing each of these risks. ■ Understand the place of Interest Rate Risk and
Designed to deliver a deep, practical understanding Liquidity Risk within Market Risk, Liquidity Risk
of Market Risk, Liquidity Risk and Asset Liability and Asset Liability Management
Management in financial institutions, the Handbook is ■ Apply these elements in a Balance Sheet
written by an all-practitioner author team from major Management approach to risk management and
financial institutions around the globe. appreciate the benefits of such an approach
■ Describe the elements of FTP Governance and
READING MATERIAL Management and describe the benefits of
■ PRMIA Market, Liquidity and Asset Liability such an approach
Management Risk Manager Handbook ■ Describe the elements of FTP Methods and
understand its historical development

PROGRAM DATES AND LOCATIONS


For your convenience, the exam is offered on every business day of the year.
■ You may request to schedule your exams at any time. There is no advantage to taking your exams
on any particular date. Questions within exams are drawn from a large database of questions and
are administered randomly, creating thousands of unique exam forms, all of comparable difficulty.
■ PRMIA uses the services of VUE, part of the Pearson Publishing family, to administer the MLARM
exams. Pearson VUE is a professional testing firm that has approximately 6,000 testing centers
in more than 170 countries around the world.
■ Please note some important details about registration, cancellation, identification requirements
and space availability in the Registration section found on page 3 and 4.

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FEES AND REGISTRATION REGISTRATION
Registration for the Market, Liquidity and Asset
Liability Management Risk Manager exam requires
FEES enrollment in the program. Enroll via this link:
Fees, relevant to your membership status, are given at www.prmia.org/mlarm
www.prmia.org/mlarm
When you enroll and pay the program fee, a
■ A digital copy of the MLARM Handbook is authorization to test email will be provided to you that
included with the program fee. you can use to schedule your exam at the center, date
and time of your choice.
■ Payment by credit card is required for online
purchases. Contact certification@prmia.org to
make alternative arrangements.

■ PRMIA Sustaining Members receive a


90 DAY RULE
discount on the program fee. Become a
Sustaining Member online at Please note that there is a strict PRMIA policy that exams may
www.prmia.org/membership NOT be retaken within 90 days of a prior sitting. Any candidate
attempt to transgress this policy by whatever means may result in
■ If you are interested in adopting the MLARM penalties against the candidate which could include forfeit of any
Certificate as a corporate program, please PRMIA certifications, fees, and possible expulsion from PRMIA.
contact membership@prmia.org. Special
pricing on program fees and preparatory
materials may be available to your company.

TAKING THE MARKET, LIQUIDITY AND ASSET LIABILITY


MANAGEMENT RISK MANAGER EXAM
EXAM FORMAT
PERSONAL IDENTIFICATION
The exams are computer-based. You will not receive any copies of
the questions. No paper may be brought into the testing center; On the date of your appointment,
however, you will be provided with an erasable board upon request. arrive at the testing center at least
15 minutes before the scheduled
Once admitted to the testing room, there will be a tutorial that intro- start time. You must bring two
duces the functionality of the exam and a brief message from PRMIA. forms of identification with you.
After this has been viewed, you may begin your exam. You will be The first must be a current
asked multiple-choice questions with four possible responses. There government-issued ID with your
are no breaks allowed during the exam. The testing system allows photograph and signature.
you to mark and review questions as long as time is remaining.
Please note that you are unlikely to finish
Examples of Acceptable Forms of Government Issued ID
your exams with substantial extra time.
■ Driver’s License ■ National Identity Card

You are encouraged to use the tutorial in ■ Passport ■ Military ID

an expedient manner, but sufficient time is


Examples of Acceptable Forms of Supplemental ID
allocated for you to complete the tutorial ■ Credit Card ■ Employee ID Card
and the exam.
Examples of Unacceptable Forms of ID
■ Library Card ■ Social Security Card

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ARRIVE ON TIME
It is very important that you leave enough CANCELLATIONS/CHANGES
time to arrive at the testing center early.
In recognition of the busy and changing
Candidates that arrive late to the test center schedules of risk managers, you may change
may not be permitted to test. The full charge your exam appointment without charge
for the exam will be made if you are not through the Pearson Vue system at
admitted for any reason. As these centers www.pearsonvue.com/prmia. Please note that
offer exams for other organizations as well, all change requests must be made at least
not everyone in the room will be taking the one business day before the testing date
same exam, so no assumptions should be or the entire exam fee will be forfeited.
made about when other candidates enter
Because of the flexibility in rescheduling,
or leave the testing center.
exam fees are non-refundable.

EXAMINATION ADMINISTRATION
Each testing center has an administrator who can assist candidates
with any questions that they may have. In the event of any incident
(computer failure, inadequate supplies, excessive noise, or any other
EXAM SECURITY
circumstance) which the candidate believes is not compatible with
good examination conditions, this must be brought to the attention of The Market, Liquidity and Asset
the examination proctor immediately upon the incident being noticed Liability Management Risk
— without continuing the exam. Failure to inform the proctor in this Manager exam is conducted
manner will invalidate any subsequent candidate incident reporting under secure conditions. Any
which cannot be substantiated by the test center. attempt by candidates to copy
questions, by any means includ-
Your exam results should be available within 15 business days of your ing unorganized memorizing,
test date and will be delivered to you via the PRMIA website which and to distribute these questions
you can access by logging in to the PRMIA website. You will find the to other individuals, will be
results within “My Profile.” treated as unethical behavior
and may result in penalties
against the candidate which
could include forfeit of any
PRMIA certifications, fees, and
possible expulsion from PRMIA.
Indictment to copy and usage of
copied questions may also result
in the same penalties.

CALCULATORS
An online scientific calculator, Texas
Instrument TI308XS, is part of the test
delivery system. No other materials may be
brought into the exam room with you. It is
suggested that candidates purchase the
hand-held version (TI-30XS) to fully
familiarize themselves with the calculator.

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MARKET, LIQUIDITY AND ASSET LIABILITY MANAGEMENT
RISK MANAGER CERTIFICATE SYLLABUS

Market Risk

Chapter 1: Market Risk Introduction


■ Typology of Market Risk Exposures Chapter 4: Market Risk in the Trading Books:
■ Asset Liability Management Business-Specific Context
■ Funds Transfer Pricing ■ Contextual Introduction to Bank Trading
■ Industry Best Practices Activities & Historical Development of
Financial Product Markets
■ Content of Market Risk Section
■ Fixed Income
Chapter 2: Market Risk Governance
■ FX and Rates Trading
and Management ■ Equity Market Trading
■ Introduction
■ The Post-Crisis, Risk-Regulatory Framework Chapter 5: Commodities Market Risk
Management
■ Setting the Stage for Market Risk
Governance ■ Introduction
■ True Market Risk Governance ■ Market Participants
■ Committees: Market Risk Appetite ■ Key Products and Instruments
and Market Risk Limits ■ Risk Implications of Physical Nature
■ Roles and Responsibilities in Practice of Commodities
■ Market Risk Limits and Limit Policies ■ Price Risk Management
■ Risk Management Systems ■ Stress Testing
■ Risk Management Data
Chapter 6: Market Risk Stress Testing —
■ Monitoring Market Risk
Beyond the VaR Threshold
■ What is the Role of the Audit Function?
■ Introduction
■ Model Risk Governance
■ Dangerous Unknowns
■ Valuation in a Marked-to-Market
World during Low Liquidity
■ Stress Testing: Static and Otherwise
■ Conclusion: Steps to Success
■ Beyond Comparative Static Analysis
■ Appendix
■ Systemic Risk Lessons from Beyond Finance
■ Moving Beyond Value at Risk
Chapter 3: Market Risk Measurement ■ Practical and Organizational Considerations
■ Value at Risk — Overview ■ Challenges of Stress Testing
■ Advanced VAR Models — Univariate ■ Conclusion
■ Advanced VaR Models — Multivariate ■ Appendix A — Examples of Stress Testing
■ Scenario Formulation — The Fundamental
Challenge of Stress Testing
■ The Market’s Greatest Hits — Calibrating
Stress Scenarios Based on History
■ The Achilles Heel Approach

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Asset Liability Management
& Funds Transfer Pricing

Chapter 7: ALM and the Recent Crisis Chapter 10: Liquidity Risk
■ Overall Causes of the Crisis ■ Overview
■ Balance Sheet Related Causes of the Crisis ■ Fundamentals of Liquidity
■ The Effects of the Crisis ■ Measurement and Management
■ In Focus: Lehman Brothers ■ Recent Developments
■ Responses to the Crisis
■ In Focus: The Irish Banking Industry Crisis Chapter 11: Balance Sheet Management
■ Into the Book: Lessons from the Crisis for ■ Introduction
Balance Sheet Management ■ The ALCO
■ Capital Management
Chapter 8: An Introduction to Asset Liability
■ Strategy and Products
Management
■ Crisis Management and the
■ ALM Overview
Contingency Funding Plan
■ An Introduction to Gaps
■ In Focus: Contagion between Risk Types
Chapter 12: Bank Funds Transfer Pricing (FTP)
■ Banking Book versus Trading Book
■ Introduction
■ ALM Objectives
■ FTP Governance and Management
■ Roles within ALM
■ FTP Methods and Historical
Development
Chapter 9: Interest Rate Risk
■ Other FTP Challenges
■ Overview ■ Conclusion
■ Components of Interest Rate Risk
■ Measurement
■ Management

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MLARM SYLLABUS SUMMARY
Number of Questions Percentage
in the Exam of the Exam
Chapter
1 Market Risk Introduction 1 5%
2 Market Risk Governance and Management 6 8%
3 Market Risk Measurement 7 12%
4 Market Risk in the Trading Books: 7 12%
Business-Specific Context
5 Commodities Market Risk Management 7 12%
6 Market Risk Stress Testing — 6 10%
Beyond the VaR Threshold
7 ALM and the Recent Crisis 5 8%
8 An Introduction to Asset Liability Management 5 9%
9 Interest Rate Risk 4 6%
10 Liquidity Risk 4 6%
11 Balance Sheet Management 4 6%
12 Bank Funds Transfer Pricing (FTP) 4 6%
Total 60 100%

Bank Funds Transfer Pricing (FTP)


Market Risk Introduction
Balance Sheet Management
6% 5% Market Risk Governance
Liquidity Risk 6% 8% and Management
6%
Interest Rate Risk Market Risk Measurement
6% 12%
An Introduction to Asset
Liability Management 9% 12% Market Risk in the Trading
8% Books: Business-Specific
Context
ALM and the Recent Crisis
10% 12%
Market Risk Stress Testing — Commodities Market
Beyond the VaR Threshold Risk Management

PREPARING FOR THE EXAM


REQUIRED RESOURCE

PRMIA Market, Liquidity and Asset Liability Management Risk Manager Handbook
This Handbook will lead you through the main study points of the exam.

The Market Risk, Liquidity Risk and Asset Liability Management Risk Manager Handbook is a best practices
guide to all elements needed for the successful implementation of an approach to managing each of
these risks. Designed to deliver a deep, practical understanding of Market Risk, Liquidity Risk and Asset
Liability Management in financial institutions, the Handbook is written by an all-practitioner author
team from major financial institutions around the globe.

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