🎓 Modern Portfolio Theory & CAPM | FRM Part I Full Tutorial
Master two of the most heavily tested topics in the FRM Part I exam —
Modern Portfolio Theory (MPT) and the Capital Asset Pricing Model (CAPM)
— in one structured, exam-focused tutorial.
Whether you're sitting the FRM exam, studying CFA Level I, or simply
building a rock-solid foundation in quantitative portfolio management,
this video walks you through every concept clearly, precisely, and
with real worked examples.
📌 WHAT YOU WILL LEARN IN THIS VIDEO
✅ The Markowitz Mean-Variance Framework — how rational investors
evaluate portfolios using expected return and variance
✅ Portfolio Variance Formula — the role of covariance and
correlation in two-asset and multi-asset portfolios
✅ Diversification Mechanics — why combining low-correlation
assets reduces portfolio risk
✅ The Markowitz Efficient Frontier — how to identify efficient,
suboptimal, and inefficient portfolios (Portfolios P, K, L, M)
✅ Correlation Instability in Real Markets — 2008 crisis evidence
and regime-aware risk management
✅ Practical Limitations of MPT — estimation error, fat tails,
non-normal returns, and robust optimisation
✅ CAPM Setup — systematic vs. idiosyncratic risk, and why only
beta is priced in equilibrium
✅ CAPM Assumptions — homogeneous expectations, two-fund
separation theorem, frictionless markets
✅ Beta Deep Dive — definition, interpretation (aggressive,
defensive, negative), and worked calculation
✅ CAPM Expected Return Equation — step-by-step breakdown with
a worked numerical example
✅ CML vs. SML — the most commonly confused distinction in
FRM and CFA exams, explained precisely
✅ Empirical Beta Estimation — OLS regression, J.P. Morgan
example, raw vs. adjusted (Blume's) beta
✅ Beta in Practice — corporate hurdle rates, empirical cautions,
and the three questions beta answers
📥 PRACTICE EXERCISES — DOWNLOAD HERE
Download the MPT & CAPM practice exercise sheet to test your
understanding and prepare for exam-style questions:
The exercise pack includes:
• Portfolio variance calculation problems (2-asset & 3-asset)
• CAPM expected return worked examples
• Beta estimation and interpretation questions
• CML vs. SML classification exercises
• FRM-style multiple choice questions with answer keys
📚 THIS VIDEO IS PART OF THE FRM PART I TUTORIAL SERIES
This tutorial is part of a structured FRM Part I preparation series
covering all core readings — from quantitative methods and foundations
of risk management to financial markets and portfolio theory.
🔔 Subscribe and hit the bell to be notified of every new tutorial.
👍 Like this video if it helped you — it supports the channel.
💬 Drop your questions in the comments — I respond to every one.
#FRM #FinancialRiskManager #CAPM #ModernPortfolioTheory
#EfficientFrontier #Beta #CML #SML #Markowitz #FRMExam
#FRMPartI #PortfolioTheory #QuantitativeFinance
#FinanceTutorial #InvestmentManagement #RiskManagement
#FRMPreparation #CFA #FinancialEducation #AssetPricing