GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 331:

  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. $50,000
  C. $75,000
  D. $105,000
  B. $50,000

• Question 332:

  In additional to the commodity-specific risks, which of the following risks represent the main commodity derivative risks?

  I. Basis

  II. Term

  III. Correlation

  IV.

  Seasonality

  A. I, II
  B. II, III
  C. I, IV
  D. I, II, III, IV
  I. Basis II. Term III. Correlation IV. Seasonality
  D. I, II, III, IV

• Question 333:

  Which of the activities represent examples of market manipulation?

  A. Market gap
  B. Crowded trades
  C. Short squeeze
  D. Stop-loss order
  C. Short squeeze

• Question 334:

  Which one of the following statements about futures contracts is correct?

  I. Futures contracts are subject to the same risks as the underlying instruments.

  II. Futures contracts have additional interest rate risk die to the future delivery date.

  III.

  Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.

  A. I
  B. I, III
  C. II, III
  D. I, II, III
  I. Futures contracts are subject to the same risks as the underlying instruments. II. Futures contracts have additional interest rate risk die to the future delivery date. III. Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.
  A. I

• Question 335:

  To ensure good risk management which of the following should be true about the CRO role and function?

  A. The CRO should receive compensation that is directly determined by the profit of the trading desk.
  B. The CRO should report to the CEO or the Board of Directors.
  C. The CRO should not be involved with the setting of risk limits.
  D. To ensure efficient flow of information the CRO should not be independent of business units.
  B. The CRO should report to the CEO or the Board of Directors.

• Question 336:

  Which of the following statements describes correctly the objectives of position mapping?

  I. For VaR calculations, mapping converts positions based on their deltas to underlying factor risks.

  II. Position mapping models risk factors affecting the value of a position as combination of core risk factors used in the VaR calculations.

  III. Position mapping groups similar positions into one group based on the closeness of their respective VaR.

  IV.

  Position mapping reduces the possible number of risk factors to a computationally manageable level.

  A. I and II
  B. II and IV
  C. I, II and III
  D. II, III, and IV
  I. For VaR calculations, mapping converts positions based on their deltas to underlying factor risks. II. Position mapping models risk factors affecting the value of a position as combination of core risk factors used in the VaR calculations. III. Position mapping groups similar positions into one group based on the closeness of their respective VaR. IV. Position mapping reduces the possible number of risk factors to a computationally manageable level.
  B. II and IV

• Question 337:

  DeltaFin wants to develop a control scoring method for its RCSA program. Which of the following statements regarding scoring methods are correct?

  I. DeltaFin can develop a control scoring method that assesses both the design and the performance of the control.

  II. DeltaFin can combine the design and performance scores for each control to produce an overall control effectiveness score.

  III. DeltaFin can use the control performance scores to compute an overall risk severity score.

  IV.

  DeltaFin can determine its own appropriate control scoring method.

  A. I only
  B. II and III
  C. I, II and IV
  D. II, III, and IV
  I. DeltaFin can develop a control scoring method that assesses both the design and the performance of the control. II. DeltaFin can combine the design and performance scores for each control to produce an overall control effectiveness score. III. DeltaFin can use the control performance scores to compute an overall risk severity score. IV. DeltaFin can determine its own appropriate control scoring method.
  C. I, II and IV

• Question 338:

  Which one of the following four statements about planning for the operational risk framework is INCORRECT?

  A. Planning for the operational risk framework involves setting clear goals, realistic milestones and achievable deliverables that add value.
  B. An operational risk framework is a complex and evolving challenge, and to keep its development under control it is important to apply strong project management skills to the design and implementation of each new element.
  C. Planning for the operational risk framework suggests that short-term planning and focus on immediate benefits is strongly preferred to the long-term planning approach.
  D. Once the elements of an operational risk framework are up and running, they need to be monitored to ensure they maintain their integrity and do not deteriorate over time.
  C. Planning for the operational risk framework suggests that short-term planning and focus on immediate benefits is strongly preferred to the long-term planning approach.

• Question 339:

  Which of the following would a bank resort to as a "lender of last resort" in the event of an extreme liquidity crisis?

  A. U.S treasury markets
  B. Discount window
  C. LIBOR markets
  D. Futures Markets
  B. Discount window

• Question 340:

  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 market risk premium
  B. Oil forward price = Expected future oil price ?storage cost + Oil market risk premium
  C. Oil forward price = Expected future oil price ?Oil storage cost + (1 + Oil market risk premium)
  D. Oil forward price = Expected future oil price ?Oil storage cost + (1 - Oil market risk premium)
  A. Oil forward price = Expected future oil price ?Oil market risk premium