Free 2016-FRR Exam Dumps Preview

Which of the following statements about implementation of a successful RCSA program is correct?

Which one of the four following statements about Basis point values is correct?

Basis point value:

Which one of the four following non-statistical risk measures are typically not used to quantify market risk?

Unico Delta stock is trading at $20 per share, its annualized dividend yield is 5% and the 12-month LIBOR is 3%. Given these statistics, the 12-month futures contact will trade at:

Suppose Delta Bank enters into a number of long-term commercial and retail loans at fixed rate prevailing at the time the loans are originated. If the interest rates rise:

An options trader for a large institutional investor takes a long equity option position.

Which of the following risks need to be considered when taking this position?

I. All the risks of underlying equities
II. Perceived volatility changes
III. Future dividends yields
IV. Risk-free interest rates

Bank Sigma has an opportunity to do a securitization deal for a credit card company, but has to retain a portion of the residual risk of the deal with an estimated VaR of $8 MM. Its fees for the deal are $2 MM, and the short-term financing costs are $600,000.

What would be the RAROC for this transaction?

Which one of the following four statements correctly identifies the Basel II Accord's definition of operational risk?

Which one of the four following activities is NOT a component of the daily VaR computing process?

Which one of the following statements correctly identifies risks in foreign exchange forwards?

Which one of the following four statements correctly defines an option's delta?

Which one of the following four features is NOT a typical characteristic of futures contracts?

Which one of the following four mathematical option pricing models is used most widely for pricing European options?

To reduce the variability of net interest income, Gamma Bank can swap positions that make its duration gap equal to

Which of the following are conclusions that could be drawn from the shape of the statistical distribution of losses that a bank might incur over a future time period?

I. In most years a bank would look more profitable than it will be on average.
II. Most of the time a sufficiently well capitalized bank will appear over-capitalized.
III. Bad years do not come along very often, but when they do they lead to enormous losses.

The exercise for an American type option prior to expiration day is virtually certain in the following case:

For which one of the following four reasons do corporate customers use foreign exchange derivatives?

I. To lock in the current value of foreign-denominated receivables
II. To lock in the current value of foreign-denominated payables III. To lock in the value of expected future foreign-denominated receivables IV. To lock in the value of expected future foreign-denominated payables

After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ return on equity for the bank, because the cash generated by the risk-transfer and the overall ___ of the bank's exposure to the risk.

Which of the following statements regarding bonds is correct?

I. Interest rates on bonds are typically stated on an annualized rate.
II. Bonds can pay floating coupons that are directly linked to various interest rate indices.
III. Convertible bonds have an element of prepayment risk.
IV. Callable bonds have an element of equity risk.

A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position.
At first approximation, what is the overall exposure to USD depreciation?

Which one of the four following statements regarding minimum loss data standards is not correct?

A risk analyst at EtaBank wants to estimate the risk exposure in a leveraged position in Collateralized Debt Obligations. These particular CDOs can be used in a repurchase transaction at a 20% haircut.
If the VaR on a $100 unleveraged position is estimated to be $30, what is the VaR for the final, fully leveraged position?

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 customer of EtaBank, Alfred Fall, fell on the marble floors of the bank and sustained substantial injuries.
Subsequently, he won a personal injury claim of $50,000 against EtaBank.

How should EtaBank's operational loss data event information database categorize this event?

Which of the following statements about a bank's behavior regarding Risk Adjusted Return on Capital (RAROC) is correct?

I. A bank should always seek to maximize their overall RAROC.
II. A bank should consider investing in a business even with negative RAROC if it increases the RAROC of the bank as a whole.
III. A bank should minimize its overall RAROC by controlling the absolute and relative amount of risk of its businesses.
IV. A bank should maximize its RAROC by always investing in a new business that maximizes the RAROC for that business unit.

Alpha Bank estimates its 1-month, 95% VaR is 30 million EUR. This means that in the next month, there is a

Which one of the four following statements describes a specific characteristic of risk and control self-assessments (RCSA) which distinguishes it from both control assessments and risk and control assessments?

What are the add-on losses faced by a bank that is going bankrupt?

I. The discount accepted by the bank for selling its assets in a fire sale.
II. The increased cost of funding liabilities in a financially distressed situation.
III. The reduction in the present value of future growth opportunities.
IV. Loss of goodwill and intangible assets.

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?

Which one of the following four regulatory drivers for operational risk management includes risk and control requirements for financial statements in the United States?

Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:

US-based BetaBank have accumulated Japanese yen, Japanese government bonds, options on Japanese yen, and positions in commodities that have a positive correlation with yen.

Which one of the four following non-statistical risk measures could be used to evaluate the BetaBank's exposure to the Japanese economy?

Bank Alpha is making a decision about lending 10-year loans in a sector that is fairly illiquid and is looking at various options to fund the loans.

Which of the following options to fund the loans exhibits the most exogenous liquidity risk?

Why do regulatory standards impose formulaic capital calculations for all of the banks activities?

I. If the banks use different models it is difficult for a regulator to compare results across banks.
II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in their calculations.
III. By imposing standardized calculations regulators can make sure that banks do not use capital calculations to game the banking regulation system.

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.

Which one of the following four models is typically used to grade the obligations of small-and medium-size enterprises?

According to Basel II what constitutes Tier 1 capital?

Which one of the following four variables of the Black-Scholes model is typically NOT known at a point in time?

Which one of the following four statements regarding floating rate bonds is incorrect?

Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD 10 million at 95% confidence level.

Which bank is in a more risky position as measured by VaR?

Which of the following measure describes the symmetry of a statistical distribution?

Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a foreign exchange option?

Which one of the following four factors typically drives the pricing of wholesale products?

When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no credit losses.

BetaFin has decided to use the hybrid RCSA approach because it believes that it fits its operational framework.

Which of the following could be reasons to use the hybrid RCSA method?

I. BetaFin has previously created series of RCSA workshops, and the results of these workshops can be
used to design the questionnaires.
II. BetaFin believes that using the questionnaire approach should be more useful.
III. BetaFin had used the questionnaire approach successfully for certain businesses and the workshop approach for others.
IV. BetaFin had already implemented a sophisticated RCSA IT-system.

According to Basel II what constitutes Tier 2 capital?

A risk manager has a long forward position of USD 1 million but the option portfolio decreases JPY 0.50 for every JPY 1 increase in his forward position.
At first approximation, what is the overall result of the options positions?

A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off based on the average price of the underlying asset on either a few specific chosen dates or all dates within a specific pricing window.

Which one of the following four option types would most likely meet these specific foreign currency demands?

Which among the following are shortfalls of the static liquidity ladder model?

I. The static model gives a liquidity estimate only after the bank faces the liquidity problem.
II. The static model can only make projections over a few days.
III. The static model does not incorporate uncertainty in the analysis.

Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew.

How much money should the bank plan to raise so as to avoid a liquidity problem?

A credit portfolio manager analyzes a large retail credit portfolio.

Which of the following factors will represent typical disadvantages of market-linked credit risk drivers?

I. Need to supply a large number of input parameters to the model
II. Slow computation speed due to higher simulation complexity III. Non-linear nature of the model applicable to a specific type of credit portfolios IV. Need to estimate a large number of unknown variable and use approximations

A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations.
If these CDOs can be used in a repo transaction at a 20% haircut, what is the maximum leverage factor for a transaction with the CDOs?