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 Apr 06,2025.
- Exam Code: 2016-FRR
- Exam Name: Financial Risk and Regulation (FRR) Series
- Certification Provider: GARP
- Latest update: Apr 06,2025
The market risk manager of SigmaBank is concerned with the value of the assets in the bank’s trading book.
Which one of the four following positions would most likely be not included in that book?
- A . 10,000 shares of IBM worth $10,000,000.
- B . $10,000,000 loan to IBM worth $9,800,000.
- C . $10,000,000 bond issued by IBM worth $11,000,000.
- D . 300,000 options on IBM shares worth $10,000,000.
Modified duration of a bond measures:
- A . The change in value of a bond when yields increase by 1 basis point.
- B . The percentage change in a bond price when yields increase by 1 basis point.
- C . The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- D . The percentage change in a bond price when the yields change by 1%.
Securitization is the process by which banks
I. Issue 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
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
Suppose Delta Bank enters into a number of long-term commercial and retail loans at fixed rate prevailing at the time the loans are originated.
If the interest rates rise:
- A . The bank will have to pay higher interest rates to its depositors and would have to pay higher rates on its debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to fund the loans was of a shorter maturity than the loans.
- B . The bank will have to pay higher interest rates to its depositors and would have to pay lower rates on its debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to fund the loans was of a shorter maturity than the loans.
- C . The bank will have to pay lower interest rates to its depositors and would have to pay higher rates on its debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to fund the loans was of a shorter maturity than the loans.
- D . The bank will have to pay lower interest rates to its depositors and would have to pay lower rates on its debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to
fund the loans was of a shorter maturity than the loans.
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
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
A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off based on the average price of the underlying asset on either a few specific chosen dates or all dates within a specific pricing window.
Which one of the following four option types would most likely meet these specific foreign currency demands?
- A . American options
- B . European options
- C . Asian options
- D . Chooser options
James Johnson manages a bond portfolio with all investment grade bonds.
Adding which of the following bonds would minimize the credit risk of his portfolio?
- A . A
- B . B
- C . C
- D . D
BetaFin has decided to use the hybrid RCSA approach because it believes that it fits its operational framework.
Which of the following could be reasons to use the hybrid RCSA method?
I. BetaFin has previously created series of RCSA workshops, and the results of these workshops can be used to design the questionnaires.
II. BetaFin believes that using the questionnaire approach should be more useful.
III. BetaFin had used the questionnaire approach successfully for certain businesses and the workshop approach for others.
IV. BetaFin had already implemented a sophisticated RCSA IT-system.
- A . I and II
- B . I and III
- C . III and IV
- D . II, III, and IV
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