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
Gamma Bank has a significant number of retail customers and finds its balance sheet shape and structure difficult to manage.
Which one of the following characteristics of a bank with wide retail operations is INCORRECT?
- A . Banks with a wide retail base are typically driven by contractual obligations and not simply relationship considerations.
- B . Attracting and retaining customers often involves offering retail products whose features are different from wholesale market products.
- C . Pricing of retail products often has more to do with marketing considerations rather than prevailing market price.
- D . The way retail customers behave in relation to the retail banking products they hold often results in the apparent contractual obligation of the parties providing a poor description of the actual nature of the obligations.
Which one of the following four statements presents a challenge of using external loss databases in the operational risk framework?
- A . Use of benchmarked data reflects similar data collection standards.
- B . External events are usually not of interest to senior management.
- C . If the external data is gathered from news sources, it may only reflect events that are interesting to the press.
- D . They provide a source of data on what operational loss events will occur.
A key function of treasuries in commercial/retail banks is:
I. To manage the interest margin of the banks.
II. To focus on underwriting risk.
III. To ensure strong earnings.
IV. To increase profit margins.
- A . I
- B . II
- C . II, III
- D . III, IV
An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___ risk on the contract and always receives a premium.
- A . Never, unlimited
- B . Sometimes, unlimited
- C . Never, limited
- D . Sometimes, limited
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.
According to Basel II what constitutes Tier 1 capital?
- A . Equity capital and core capital
- B . Profits to reserves and innovative Tier 1 capital
- C . Equity capital and accrued profits to reserves
- D . Core capital and innovative Tier 1 capital.
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no credit losses.
- A . Symmetric; less
- B . Symmetric; greater
- C . Asymmetric; less
- D . Asymmetric; greater
A multinational bank just bought two bonds each worth $10,000. One of the bonds pays a fixed interest of 5% semi-annually and the other pays LIBOR semi-annually. The six month LIBOR is at 5% currently. The risk manager of the bank is concerned about the sensitivity to interest rates.
Which of the following statements are true?
- A . The price of the bond paying floating interest is more sensitive to interest rates than the bond paying fixed interest.
- B . The price of the bond paying fixed interest is more sensitive to interest rates than the bond paying floating interest.
- C . Both bond prices are equally sensitive to interest rates.
- D . The given information is not enough to determine the sensitivity of the bond prices.
What is a difference between currency swaps and interest rate swaps?
- A . Currency swaps do not require the exchange of notional principal on maturity.
- B . Currency swaps allow banks and customers to obtain the risk/reward profile of long-term interest rates without having to use long-term funding.
- C . Currency swaps are OTC derivative contracts.
- D . Currency swaps generate foreign exchange rate risk in addition to interest rate risk.
Which one of the following four statements correctly defines chooser options?
- A . The owner of these options decides if the option is a call or put option only when a predetermined date is reached.
- B . These options represent a variation of the plain vanilla option where the underlying asset is a basket of currencies.
- C . These options pay an amount equal to the power of the value of the underlying asset above the strike price.
- D . These options give the holder the right to exchange one asset for another.
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