GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 111:

  Which of the following statements depicts a difference between funding liquidity risks and trading liquidity risks?

  A. Funding liquidity risks are associated with how fast prices move in the market while trading liquidity risks originate out of bank trades.
  B. Funding liquidity risks are concerned with the ability of the bank to fund deposits withdrawals while trading liquidity risks are concerned with the change in bid-offer spreads of asset values.
  C. Funding liquidity risks are short term risks while trading liquidity risks are longer term risks.
  D. Funding liquidity risks are associated only with the bank assets while trading liquidity risks are associated with both assets and liabilities of the bank.
  B. Funding liquidity risks are concerned with the ability of the bank to fund deposits withdrawals while trading liquidity risks are concerned with the change in bid-offer spreads of asset values.

• Question 112:

  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?

  A. Position turnover
  B. Position concentrations
  C. Position volatility
  D. Position sensitivities
  B. Position concentrations

• Question 113:

  Unico Bank, concerned with managing the risk of its trading strategies, wants to implement the trading strategy that exposes the bank to the lowest market risk. Which one of the following four strategies should Unico take to limit its risk exposure?

  A. A matched book strategy that allows the trading desk to match all customer positions immediately with an equal and opposite position by trading internally or with another bank.
  B. A covering strategy that manages positions in the product by executing covering deals or hedging deal at the discretion of the trading des.
  C. A passive hedging strategy that allows the traders to price transactions with customers and other banks, at the relevant bid price on the market.
  D. A market-maker strategy that allows the traders to quote a buy and sell price to customers and other banks and to trade at the relevant price on the sell side of the market.
  A. A matched book strategy that allows the trading desk to match all customer positions immediately with an equal and opposite position by trading internally or with another bank.

• Question 114:

  Mega Bank has $100 million in deposits on which it pays 3% interest, and $20 million in equity on which it pays no interest. The loan portfolio of $120 million earns an average rate of 10%. If the rates remain the same, what is the net interest income of Mega Bank?

  A. $2 million per year
  B. $5 million per year
  C. $9 million per year
  D. $12 million per year
  C. $9 million per year

• Question 115:

  Which one of the following four option types has two strike prices?

  A. Asian options
  B. American options
  C. Range options
  D. Shout options
  D. Shout options

• Question 116:

  In its VaR calculations, JPMorgan Chase uses an expected tail-loss methodology which approximates losses at the 99% confidence level. This methodology consists of two subsequent steps to estimate the VaR. Which of the following explains this two-step methodology?

  A. After VaR is computed at the 97% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.
  B. After VaR is computed at the 99% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 98% confidence level.
  C. After VaR is computed at the 99% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.
  D. After VaR is computed at the 1% confidence level, the expected tail loss in excess of that confidence level is determined, which and is then compared with the VaR estimate at the 98% confidence level.
  A. After VaR is computed at the 97% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.

• Question 117:

  In the United States, Which one of the following four options represents the largest component of securitized debt?

  A. Education loans
  B. Credit card loans
  C. Real estate loans
  D. Lines of credit
  C. Real estate loans

• Question 118:

  According to a Moody's study, the most important drivers of the loss given default historically have been all of the following EXCEPT:

  I. Debt type and seniority

  II. Macroeconomic environment

  III. Obligor asset type

  IV.

  Recourse

  A. I
  B. II
  C. I, II
  D. III, IV
  I. Debt type and seniority II. Macroeconomic environment III. Obligor asset type IV. Recourse
  D. III, IV

• Question 119:

  An associate from the finance group has been identified as an operational risk coordinator (ORC) for her department. To fulfill her ORC responsibilities the associate will need to:

  I. Provide main communication contact with operational risk department

  II. Provide main reporting contact with audit department

  III. Coordinate collection of key risk indicators in her area

  IV.

  Coordinate training and awareness activities in her area

  A. I, II
  B. II, III, IV
  C. I, II, III
  D. I, III, IV
  I. Provide main communication contact with operational risk department II. Provide main reporting contact with audit department III. Coordinate collection of key risk indicators in her area IV. Coordinate training and awareness activities in her area
  D. I, III, IV

• Question 120:

  A trader inadvertently booked a trade with incorrect information. A subsequent market move resulted in a gain to the bank. Should the bank include this amount of gain into its operational loss event data program?

  I. The bank should include this gain in its operational loss event data program as a gain realized due to operational risk events.

  II. The bank should include this gain in its operational loss event data program as it indicates that a control failed or a process is flawed.

  III.

  The bank should include this event in its operational loss event data program and record the gain as a loss resulting from operational risk.The bank should not include this event in its operational loss event data program as it is not a loss event, but a market risk event.

  A. I and II
  B. II and III
  C. I, II and III
  D. I and III
  I. The bank should include this gain in its operational loss event data program as a gain realized due to operational risk events. II. The bank should include this gain in its operational loss event data program as it indicates that a control failed or a process is flawed. III. The bank should include this event in its operational loss event data program and record the gain as a loss resulting from operational risk.The bank should not include this event in its operational loss event data program as it is not a loss event, but a market risk event.
  A. I and II