FRM Part 2 Glossary — Key Terms & Definitions
- Accuracy ratio (AR)
- Annualized loss expectancy (ALE)
- Available and Required Stable Funding (ASF/RSF)
- AT1 (Additional Tier 1)
- Backfill bias
- Basel traffic-light test
- Basis risk (IRRBB)
- Basel Committee Risk Data Principles (BCBS 239)
- Bow-tie analysis
- Breadth (BR)
- Bank Term Funding Program (BTFP)
- Business Indicator Component (BIC)
- Central clearing mandate
- Common Equity Tier 1 Capital (CET1)
- Christoffersen test
- Cox–Ingersoll–Ross (CIR) Model
- Collective action clause (CAC)
- Commitment pacing
- Component VaR
- Contingency funding plan (CFP)
- Copula
- Counterbalancing capacity
- Country risk premium (CRP)
- Cover 2
- Credit conversion factor (CCF)
- Cross-currency basis
- Credit and Debit Valuation Adjustments (CVA/DVA)
- Default waterfall
- Denominator effect
- Deposit beta
- Dispersion trade
- Distance to default (DD)
- Doom loop
- Digital Operational Resilience Act (DORA)
- Duration gap
- Economic capital
- Encumbrance
- Economic Value of Equity and Net Interest Income (EVE/NII)
- Excess spread
- Expected Loss (EL)
- Expected Positive Exposure (EPE)
- Expected shortfall (ES)
- Exposure at default (EAD)
- Fails charge
- Funds Transfer Pricing (FTP)
- Fundamental law
- Funding rate (perpetuals)
- Gates / side pockets
- General collateral (GC) / special
- Generalized Extreme Value (GEV)
- Generalized Pareto Distribution (GPD)
- G-SIB surcharge
- Haircut
- Hazard rate
- High-water mark
- Hill estimator
- High-Quality Liquid Assets (HQLA)
- Internal Capital and Liquidity Adequacy Assessment Processes (ICAAP/ILAAP)
- Loss Component (LC)
- Impact tolerance
- Impermanent loss
- Incremental VaR
- Information coefficient (IC)
- Information ratio (IR)
- Interest Rate Risk in the Banking Book (IRRBB)
- Key risk indicator (KRI)
- Kupiec test
- Liquidity Coverage and Net Stable Funding Ratios (LCR/NSFR)
- Loss Distribution Approach (LDA)
- Liquidity-adjusted VaR (L-VaR)
- Liquidity spiral
- Loss given default (LGD)
- Liquidity horizon
- Malus / clawback
- Marginal VaR
- Margin period of risk (MPoR)
- Maximum Distributable Amount (MDA)
- Merton model
- Model tiering
- Close-out netting
- Net Asset Value (NAV) Facility
- Non-Maturity Deposit (NMD)
- Novation
- Operational resilience
- Original sin
- Output floor
- Peaks-Over-Threshold (POT)
- Payment-in-Kind (PIK)
- Population stability index (PSI)
- Portability
- Potential Future Exposure (PFE)
- Pre-Provision Net Revenue (PPNR)
- Probability of default (PD)
- Prudent valuation reserve
- Risk and Control Self-Assessment (RCSA)
- Recovery rate
- Rehypothecation
- Reverse stress test
- Right-way / wrong-way risk
- Risk appetite framework
- Risk appetite statement
- Risk parity
- Risk-stabilizing primary balance
- Return on Security Investment (ROSI)
- Recovery Time and Recovery Point Objectives (RTO/RPO)
- Stress Capital Buffer (SCB)
- Basel Cryptoasset Standard (SCO60)
- Securitization tranche
- Model Explainability Methods (SHAP/LIME)
- Side letter
- Boundary event
- Smart contract risk
- Smoothing
- Sovereign debt dynamics
- Specialness
- SR 11-7
- Stablecoin
- Stack-and-roll hedge
- Standardized Measurement Approach (SMA)
- Liability-relative investing
- Surplus at risk (SaR)
- Survival horizon
- Survivorship bias
- Three lines model
- Throughput (intraday)
- Total Loss-Absorbing Capacity and Minimum Requirement for Own Funds and Eligible Liabilities (TLAC/MREL)
- Tokenization
- Tracking error
- Transfer and convertibility risk
- Transfer coefficient (TC)
- Unexpected Loss (UL)
- Unitranche
- Unsmoothing
- Usability paradox
- Value at Risk (VaR)
- Variation margin gains haircutting (VMGH)
- Vasicek model
- Viability event
- Vintage
- Volatility laundering
- Wrong-way collateral
- Specific wrong-way risk
- xVA
- Acerbi–Szekely ES backtest
- Fundamental Review of the Trading Book (FRTB)
- Non-modellable risk factor (NMRF)
- Risk factor eligibility test (RFET)
- P&L attribution test
- Stressed expected shortfall
- Default risk charge (DRC)
- Base correlation
- Tail dependence
- Basic approach CVA (BA-CVA)
- Standardized approach CVA (SA-CVA)
- Standardized approach for counterparty credit risk (SA-CCR)
- Replacement cost (RC)
- Initial margin
- Variation margin
- Central counterparty (CCP)
- Granularity adjustment
- Asset correlation
- Lifetime expected credit loss
- International Financial Reporting Standard 9 (IFRS 9) Staging
- Credit transition matrix
- Scenario analysis (operational risk)
- External loss data
- Model drift
- Challenger model
- Intraday liquidity
- Behavioral maturity
- Deposit runoff rate
- Equal risk contribution (ERC)
- Maximum diversification portfolio
- Physical climate risk
- Climate transition risk
- Artificial Intelligence (AI) Model Risk
- Digital bank run
- Fund liquidity mismatch
- Market liquidity premium
- Benchmark transition basis risk
- Alternative Investments & Hedge Funds
- Extreme Value Theory (EVT)
- Volatility & the Smile
- Backtesting VaR
- VaR Mapping
- Performance Measurement
- Term Structure Models (Vasicek / CIR)
- Illiquid Assets
- Estimating Market Risk (Parametric & Historical)
- Digital Assets & Tokenization
- Factor Theory & APT
- Structural & Reduced Form Models
- Structured Finance & Securitization
- Frameworks (RCSA & KRIs)
- Liquidity Stress Testing & CFP
- Enterprise & Third Party Risk
- Measurement (SMA, BI & ILM)
- Repo, Collateral & L-VaR
- Asset–Liability Management, Banking-Book Interest-Rate Risk, and Funds Transfer Pricing (ALM/IRRBB/FTP)
- Portfolio Construction & Risk Budgeting
- Artificial Intelligence & XAI
- Recent Bank Failures (SVB / Credit Suisse)
- Private Markets & Private Credit
- Macro & Geopolitical Risk
- Basel Framework, RAROC & Stress Testing
- Correlation, Copulas & Dependence
- Liquidity Risk Principles
- Benchmark & Regulatory Reform