2016-FRR Dumps with Practice Exam Questions Answers
2016-FRR by Financial Risk and Regulation Actual Free Exam Practice Test
GARP 2016-FRR Certification Exam is a rigorous and challenging exam that requires a strong understanding of financial risk management concepts and regulatory frameworks. To prepare for the exam, candidates are encouraged to study the GARP 2016-FRR Study Guide, which provides an in-depth review of the exam topics and includes practice questions and exercises. Candidates may also attend GARP-sponsored training courses or use other study materials to prepare for the exam.
The Global Association of Risk Professionals (GARP) offers an exam series known as the Financial Risk and Regulation (FRR) Series. The FRR Series is designed for professionals looking to enhance their knowledge in financial risk management and regulatory compliance. 2016-FRR exam series covers topics such as financial risk management, credit risk, market risk, operational risk, and regulatory compliance.
The GARP 2016-FRR exam is divided into two parts – Part 1 and Part 2. Part 1 covers topics such as market risk, credit risk, operational risk, and risk management frameworks. Part 2 focuses on topics such as financial regulation, capital adequacy, and risk governance.
NEW QUESTION # 66
Which of the following are among the main uses of risk reports?
I. Identification of exceptional situations that require managerial attention.
II. Display the relative risk among different trades.
III. Specify how RAROC will be maximized within the bank.
IV. Estimate the overall risk levels of the bank.
- A. II and IV
- B. II, III, and IV
- C. I, II and IV
- D. II and III
Answer: C
NEW QUESTION # 67
Typically, which one of the following four option risk measures will be used to determine the number of
options to use to hedge the underlying position?
- A. Rho
- B. Delta
- C. Theta
- D. Vega
Answer: B
NEW QUESTION # 68
Which of the following statements are reasons for mathematical valuation and risk assessment models to be
misleading or inaccurate?
I. There could be missing factors in models.
II. The data used as input for the model could be bad or wrong.
III. Model results could be misinterpreted.
IV. There could be errors in the derivation of the model.
- A. I, III, and IV
- B. I, II, III IV
- C. III and IV
- D. I, II, and III
Answer: B
NEW QUESTION # 69
Which one of the following four options correctly identifies the core difference between bonds and loans?
- A. These instruments receive a different legal treatment.
- B. These instruments have different pricing drivers.
- C. These instruments are subject to different credit counterparty regulations.
- D. These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.
Answer: A
NEW QUESTION # 70
To estimate the interest charges on the loan, an analyst should use one of the following four formulas:
- A. Loan interest = Risk-free rate - Probability of default x Loss given default + Spread
- B. Loan interest = Risk-free rate - Probability of default x Loss given default - Spread
- C. Loan interest = Risk-free rate + Probability of default x Loss given default - Spread
- D. Loan interest = Risk-free rate + Probability of default x Loss given default + Spread
Answer: D
NEW QUESTION # 71
A trader attempts to hold long positions when markets are rising and hold short positions when markets are
falling. Which one of the following four trading styles is she likely to use?
- A. Black box trading
- B. Contrarian trading
- C. Technical trading
- D. Market timing trading
Answer: D
NEW QUESTION # 72
AlphaBank's management is evaluating how changes in its business environment could materially impact risk
categories. As a result, bank's management decides to implement the structure, which facilitates the discussion
in an integrative context, spanning market, credit, and operational risk factors, and encourages transparency
and communication between risk disciplines. Which one of the following four approaches should the
management choose to achieve this strategic goal?
- A. Enterprise risk management approach
- B. Taxonomy-based risk management approach
- C. Regulatory risk management approach
- D. Scenario-based risk management approach
Answer: A
NEW QUESTION # 73
Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that
settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On
day 2, $1 million in loans is coming in with an expected default rate of 1% and on day 3, $2 million in loans is
coming in with expected default rate of 2%. How much should the bank plan to raise in order to avoid liquidity
problems?
- A. $550 million
- B. $508 million
- C. $500 million
- D. $510 million
Answer: D
NEW QUESTION # 74
In hedging transactions, derivatives typically have the following advantages over cash instruments:
I. Lower credit risk
II. Lower funding requirements
III. Lower dealing costs
IV. Lower capital charges
- A. II, IV
- B. I, II, III, IV
- C. I, II
- D. I, III
Answer: B
NEW QUESTION # 75
Which one of the following four factors typically drives the pricing of wholesale products?
- A. Overall risk exposure
- B. Prevailing market price
- C. Marketing considerations
- D. Long-term competitiveness
Answer: B
NEW QUESTION # 76
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year
no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate
spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both
interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta
defaults, the bank expects to lose 50% of its promised payment. Hence, the loss rate in this case will be
- A. 1%
- B. 5%
- C. 3%
- D. 10%
Answer: A
NEW QUESTION # 77
Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk
is correct?
- A. Parametric methods generally assume returns are normally distributed, and non-parametric methods
make no assumptions about return distributions. - B. Both parametric and nonparametric methods assume returns are normally distributed.
- C. Both parametric and nonparametric methods make no assumptions about return distributions.
- D. Parametric methods make no assumptions about return distributions, and non-parametric methods
assume returns are normally distributed.
Answer: A
NEW QUESTION # 78
To estimate the forward price of oil, a commodity trader would most likely use the following pricing
relationship:
- A. Oil forward price = Expected future oil price ± Oil storage cost + (1 + Oil market risk premium)
- B. Oil forward price = Expected future oil price ± Oil storage cost + (1 - Oil market risk premium)
- C. Oil forward price = Expected future oil price ± Oil market risk premium
- D. Oil forward price = Expected future oil price ± storage cost + Oil market risk premium
Answer: C
NEW QUESTION # 79
Which of the following bank events could stress the bank's liquidity position?
I. Maturing of bank debt
II. Repurchase agreements
III. Futures margins
IV. Staff turnover
- A. III, IV
- B. IV
- C. I, II
- D. I, II and III
Answer: D
NEW QUESTION # 80
A risk manager is considering how to best quantify option price dynamics using mathematical option pricing
models. Which of the following variables would most likely serve as an input in these models?
I. Implicit parameter estimate based on observed market prices
II. Estimates of sensitivity of option prices to parameter changes
III. Theoretical option determination based on assumptions
- A. II, III
- B. I, II, III
- C. II
- D. I, III
Answer: B
NEW QUESTION # 81
Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly
approximates the yield on a risk-free instrument:
- A. Bond + CDS
- B. Bond - CDS
- C. Bond - CDS - Market spread
- D. Bond + CDS + Market Spread
Answer: A
NEW QUESTION # 82
Which one of the following four statements correctly defines chooser options?
- A. These options represent a variation of the plain vanilla option where the underlying asset is a basket of
currencies. - B. The owner of these options decides if the option is a call or put option only when a predetermined date
is reached. - C. These options give the holder the right to exchange one asset for another.
- D. These options pay an amount equal to the power of the value of the underlying asset above the strike
price.
Answer: B
NEW QUESTION # 83
Bank Omega is using futures contracts on a well capitalized exchange to hedge its market risk exposure.
Which of the following could be reasons that expose the bank to liquidity risk?
I. The bank may not be able to unwind the futures contracts before expiration.
II. Prices may move such that a loss results on the hedge.
III. Since futures require margins which are settled every day, the bank could find itself scrambling for funds.
IV. Exchange margin requirements could change unexpectedly.
- A. III, IV
- B. I, III, IV
- C. I, II, III, IV
- D. I, IV
Answer: A
NEW QUESTION # 84
The exercise for an American type option prior to expiration day is virtually certain in the following case:
- A. In the event of a high dividend for an in-the-money call option
- B. In the event of a low dividend for an in-the-money put option
- C. In the event of a high dividend for an in-the-money put option
- D. In the event of a low dividend for an in-the-money call option
Answer: A
NEW QUESTION # 85
Which one of the four following statements about a minimal loss threshold in operational loss data collection
is incorrect?
- A. A company can have differing operational loss data collection and reporting thresholds for different
departments. - B. The operational loss data collection program has to capture all losses regardless of their size.
- C. The operational loss data collection program must include all material losses that are above minimal
gross loss threshold. - D. Setting an operational loss data collection threshold depends on the risk appetite of the firm and
regulatory requirements it needs to meet.
Answer: B
NEW QUESTION # 86
A bank considers issuing new capital to increase its Tier 1 capital levels. Which of the following financial
instruments would most likely to be considered?
- A. Long-term and callable debt convertible to equity
- B. Short-term debt convertible to non-cumulative preferred shares
- C. Short-term callable debt
- D. Convertible preferred shares
Answer: D
NEW QUESTION # 87
For two variables, which of the following is equal to the average product of the deviations from their
respective means?
- A. Kurtosis
- B. Standard deviation
- C. Covariance
- D. Correlation
Answer: C
NEW QUESTION # 88
Financial regulators in a European country are considering banning trading in highly complex derivative
instruments that are not settled through a centralized clearinghouse. This ban can result in:
I. The value of the country's currency dropping
II. Counterparties involved in trading of these derivative instruments failing to fulfill their obligations
III. The business model relying on these instruments failing
IV. Certain activities becoming illegal
- A. II, III, IV
- B. II, III
- C. I, II
- D. I, IV
Answer: A
NEW QUESTION # 89
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is
collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at
50%. In this case, what will the bank's exposure at default (EAD) be?
- A. $25,000
- B. $105,000
- C. $50,000
- D. $75,000
Answer: C
NEW QUESTION # 90
......
Free Financial Risk and Regulation 2016-FRR Exam Question: https://guidetorrent.dumpstorrent.com/2016-FRR-exam-prep.html