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 26,2025.
- Exam Code: 2016-FRR
- Exam Name: Financial Risk and Regulation (FRR) Series
- Certification Provider: GARP
- Latest update: Apr 26,2025
Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?
- A . Interest rate risk and credit risk
- B . Interest rate risk only
- C . Credit Risk only
- D . The bank does not incur any risk since the loan is not yet originated
Why is economic capital across market, credit and operational risks simply added up to arrive at an estimate of aggregate economic capital in practice?
- A . Market, credit and operational risks are perfectly correlated which justifies adding up their associated economic capital.
- B . In practice, it is very difficult to estimate the correlations between the risk categories and as a result a conservative estimate is obtained by adding up the risks.
- C . Regulators require banks to add up economic capital across market, credit and operational risks.
- D . Since market, credit and operational risks are significantly different measures of risk, there is no
diversification benefit to computing economic capital to banks across types of risks.
Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:
- A . The change in value of a bond when yields increase by 0.01%.
- B . The percentage change in bond price when yields change 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 bond price when the yields change by 1%.
To estimate the required risk-adjusted rate of return on a highly volatile energy stock, a risk associate compiled the following statistics:
Risk-free rate = 5%
Beta = 2.5
Market Risk = 8%
Using the Capital Asset Pricing Model, she estimates the rate of return to be equal:
- A . 10%
- B . 15%
- C . 25%
- D . 40%
If a bank is long £500 million pounds, short £300 million in delta-equivalent pound options, and long £100 million in pound-denominated stocks, what is the amount of pound exposure that would be shown in the aggregated risk reports?
- A . £300 million pounds
- B . £500 million pounds
- C . £800 million pounds
- D . £900 million pounds
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
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while the risk of loss to the other large bank will increase.
By running the trades through a clearinghouse, the small bank can achieve all of the following objectives EXCEPT:
- A . Eliminating the collateral requirement
- B . Protecting itself against increases in future collateral demands
- C . Protecting against the risk of the failure of one of the large banks
- D . Mitigating option hedging risks and altering margin requirement
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
What is a common implicit assumption that is made when computing VaR using parametric methods?
- A . The expected returns are constant, but the standard deviation changes over time.
- B . The standard deviations of returns are constant, but the mean changes over time.
- C . The mean of and the standard deviations of returns are both constant.
- D . The mean and standard deviation of returns change periodically in response to crises.
In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may borrow up to ___ of the value of the securities from their brokers.
- A . 30%
- B . 40%
- C . 50%
- D . 60%
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