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