GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 221:

  Which of the following statements defines Value-at-risk (VaR)?

  A. VaR is the worst possible loss on a financial instrument or a portfolio of financial instruments over a given time period.
  B. VaR is the minimum likely loss on a financial instrument or a portfolio of financial instruments with a given degree of probabilistic confidence.
  C. VaR is the maximum of past losses over a given period of time.
  D. VaR is the maximum likely loss on a financial instrument or a portfolio of financial instruments over a given time period with a given degree of probabilistic confidence.
  D. VaR is the maximum likely loss on a financial instrument or a portfolio of financial instruments over a given time period with a given degree of probabilistic confidence.

• Question 222:

  The main building blocks of an operational risk framework include all of the following options EXCEPT:

  A. Loss data collection
  B. Risk and control self-assessment
  C. Compliance document preparation
  D. Scenario analysis
  C. Compliance document preparation

• Question 223:

  Which one of the following four statements regarding counterparty credit risk is INCORRECT?

  A. Counterparty credit risk refers to the inability to realize gains in a contract with a counterparty due to its default.
  B. The exposure at default is variable due to fluctuations in swap valuations.
  C. The exposure at default can be negatively correlated to probability of default.
  D. Dynamic collateral provisions often increase counterparty risk considerably.
  B. The exposure at default is variable due to fluctuations in swap valuations.

• Question 224:

  Which one of the following four statements about regulatory capital for a bank is accurate?

  A. Regulatory capital is determined by rules imposed by an outside authority, such as a supervisor or central bank.
  B. Regulatory capital is the lowest level of economic capital the bank should have to meet regulatory requirement.
  C. Regulatory capital reflects the economic tradeoffs of the bank as accurately as the bank can represent them.
  D. Regulatory capital is less than the regulatory capital requirement.
  A. Regulatory capital is determined by rules imposed by an outside authority, such as a supervisor or central bank.

• Question 225:

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

  A. Floating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.
  B. Floating rate bonds typically have less price risk than fixed rate bonds.
  C. Floating rate bonds are very sensitive to changes in interest rates.
  D. Floating rate bonds only have a small degree of interest rate risk.
  C. Floating rate bonds are very sensitive to changes in interest rates.

• Question 226:

  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. Vega
  B. Rho
  C. Delta
  D. Theta
  C. Delta

• Question 227:

  Which one of the following four statements represents a possible disadvantage of using total return swap to manage equity portfolio risks?

  A. Similar to the formal portfolio rebalancing strategy, the total return receiver needs to modify the size of the trading position.
  B. The total return receiver needs to incur the transaction costs of establishing an equity position.
  C. Similar to an equity forward position, the total return receiver does not get paid the dividend.
  D. The total return receiver does not have any voting rights.
  D. The total return receiver does not have any voting rights.

• Question 228:

  Which one of the following four statements correctly describes an American call option?

  A. An American call option gives the buyer of that call option the right to buy the underlying instrument on any date up to and including the expiry date.
  B. An American call option gives the buyer of that call option the right to sell the underlying instrument on any date up to and including the expiry date.
  C. An American call option gives the buyer of that call option the right to buy the underlying instrument on the expiry date.
  D. An American call option gives the buyer of that call option the right to sell the underlying instrument on the expiry date.
  C. An American call option gives the buyer of that call option the right to buy the underlying instrument on the expiry date.

• Question 229:

  Securitization is the process by which banks:

  I. IssueIssue bonds where the payment of interest and repayment of principal on the bonds depends on the cash flow generated by a pool of bank assets.

  II. Issue bonds where the bank has transferred its legal right to payment of interest and repayment of principal to bondholders.

  III.

  Sell illiquid assets.

  A. I, II
  B. I
  C. I, III
  D. I, II, III
  I. IssueIssue bonds where the payment of interest and repayment of principal on the bonds depends on the cash flow generated by a pool of bank assets. II. Issue bonds where the bank has transferred its legal right to payment of interest and repayment of principal to bondholders. III. Sell illiquid assets.
  D. I, II, III

• Question 230:

  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.

  A. I, II
  B. I, III
  C. I, II, III
  D. III
  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.
  D. III