GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 91:

  When considering the advantages of operational risk function owned by the Chief Compliance Officer in a financial institution, an operational risk manager consultant suggests that this governance approach will have all of the following advantages except:

  A. This governance structure maintains an independent operational risk function.
  B. The operational risk function is closely linked in a partnership with the compliance function to leverage data and assessment activities.
  C. The operational risk function quickly inherits an existing reporting structure, established meeting schedules and functional reporting cycles from the compliance function.
  D. In accordance with Basel II Accord, the operational risk function should report directly into the audit function and strengthen that function.
  D. In accordance with Basel II Accord, the operational risk function should report directly into the audit function and strengthen that function.

• Question 92:

  Floating rate bonds typically have ________ duration which means they have ________ sensitivity to interest rate changes.

  A. long, small
  B. long, high
  C. short, high
  D. short, small
  D. short, small

• Question 93:

  All of the following performance statistics typically benefit country's creditworthiness EXCEPT:

  A. Low unemployment
  B. Low inflation
  C. High degrees of investment
  D. Low degrees of savings
  D. Low degrees of savings

• Question 94:

  Of all the risk factors in loan pricing, which one of the following four choices is likely to be the least significant?

  A. Probability of default
  B. Duration of default
  C. Loss given default
  D. Exposure at default
  B. Duration of default

• Question 95:

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

  A. The Black model
  B. The Black-Scholes model
  C. The Garman-Kohlhagen model
  D. The Heston model
  B. The Black-Scholes model

• Question 96:

  Which of the following attributes are typical for early models of statistical credit analysis?

  A. These models assumed the default of any obligor was independent of the default of any other.
  B. The underlying default assumptions were analytically inconvenient.
  C. The underlying default assumptions failed to develop relatively simple formulas for the determination of portfolio credit risk.
  D. These models effectively incorporated herd behavior.
  A. These models assumed the default of any obligor was independent of the default of any other.

• Question 97:

  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
  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

• Question 98:

  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. Convertible preferred shares
  C. Short-term callable debt
  D. Short-term debt convertible to non-cumulative preferred shares
  B. Convertible preferred shares

• Question 99:

  Which of the following factors are typically included in standard operational risk definitions?

  I. Human errors

  II. Process failure

  III. Systems failure

  IV.

  Unexpected events

  A. I and II
  B. I and IV
  C. II and III
  D. I, II and III
  I. Human errors II. Process failure III. Systems failure IV. Unexpected events
  D. I, II and III

• Question 100:

  All of the four following exotic options are path-independent options, EXCEPT:

  A. Chooser options
  B. Power options
  C. Asian options
  D. Basket options
  C. Asian options