GARP 2016-FRR Financial Risk and Regulation (FRR) Series Online Training
GARP 2016-FRR Online Training
The questions for 2016-FRR were last updated at Mar 24,2025.
- Exam Code: 2016-FRR
- Exam Name: Financial Risk and Regulation (FRR) Series
- Certification Provider: GARP
- Latest update: Mar 24,2025
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
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.
What interest rate should Alpha Bank charge on the no-payment loan to Delta Industrial Machinery Corporation?
- A . 8%
- B . 9%
- C . 10%
- D . 12%
Which one of the following four features is NOT a typical characteristic of futures contracts?
- A . Fixed notional amount per contract
- B . Fixed dates for delivery
- C . Traded Over-the-counter only
- D . Daily margin calls
A credit associate extending a loan to an obligor suspects that the obligor may change his behavior after the loan has been originated. The obligor in this case may use the loan proceeds for purposes not sanctioned by the lender, thereby increasing the risk of default. Hence, the credit associate must estimate the probability of default based on the assumptions about the applicability of the following tendency to this lending situation:
- A . Speculation
- B . Short bias
- C . Moral hazard
- D . Adverse selection
Which one of the following four statements about hedging is INCORRECT?
- A . Traders can hedge their risks by taking an appropriate position in the underlying instrument.
- B . Traders can hedge their portfolio risks by taking a position in a different instrument.
- C . For a fully hedged portfolio, any changes in markets prices will typically produce significant changes in the market value of the portfolio.
- D . A large number of hedge positions is generally required to match the underlying transaction
completely.
Which one of the following four statements regarding bank’s exposure to credit and default risk is INCORRECT?
- A . The more the bank diversifies its credit portfolio, the better spread its credit risks become.
- B . In debt management, the value of any loan exposure will change typically in a fashion similar the same way that an equity investment can.
- C . In debt management, the goal is to minimize the effect of any defaults.
- D . Default risk cannot be hedged away fully, and it will always exist for the holder of the credit or for the
person insuring against the credit or default event.
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.
Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:
- A . Exposures can often be netted
- B . Exposure at default may be negatively correlated to the probability of default
- C . Counterparty risk creates a two-way credit exposure
- D . Collateral arrangements are typically static in nature
To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:
- A . Credit VaR
- B . Expected loss
- C . Unexpected loss
- D . Factor sensitivity
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?
- A . 25%
- B . 17.5%
- C . 33%
- D . 12%
Latest 2016-FRR Dumps Valid Version with 342 Q&As
Latest And Valid Q&A | Instant Download | Once Fail, Full Refund
