Free GARP FRM-Part-1 Exam Questions

Become GARP Certified with updated FRM-Part-1 exam questions and correct answers

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Total 533 Questions | Updated On: Jan 14, 2026

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Question 1

A risk analyst at a growing bank is concerned about a loan exposure to a large manufacturing company which is losing significant market share in its industry. The analyst considers the use of different credit risk transfer mechanisms, including CDS, to manage this exposure. Which of the following statements correctly describes an appropriate benefit of using CDS in this situation?

A : CDS provide an agreement to periodically revalue the loan and transfer any net value change.

B : CDS allow the bank to offset its exposure to the company with loan exposures to other manufacturing companies.

C : CDS quantify the manufacturing company’s default risk and allow the bank to monitor changes in this risk on a real-time basis.

D : CDS require the manufacturing company to pay back the loan in full at an earlier point in time.

Answer: C

Question 2

Which of the following is not a reason to accumulate loss data?

A : Past losses are almost always repeated in the future.

B : It focuses management attention on the magnitude and e ect of risk.

C : It provides data necessary for empirical analysis.

D : It contributes to the understanding of future expected losses.

Answer: A

Question 3

All of the following are reasons that Nick Leeson engaged in aggressive speculative trading in the Barings Bank collapse except:

A : Barings’ lack of risk management oversight.

B : Barings’ risk management models were awed.

C : he was attempting to recover previous trading losses.

D : his authority over settlement operations allowed him to hide trading losses.

Answer: B

Question 4

A risk analyst uses the bootstrap method to assess the market risk of a global equity portfolio that experienced significant volatility in the recent past. The analyst applies independent and identically distributed (IID) bootstrapping to the extracted standardized residuals of the fitted model, and these bootstrapped standardized residuals are then used to generate time paths of future asset returns. In the final step, the simulated data is used to estimate the VaR of the global equity portfolio over a 1-month horizon. Which of the following will the analyst find to be correct when applying the IID bootstrap method?

A : The VaR estimates will be reliable because the IID bootstrap fully captures interdependencies in the observed asset return data.

B : The VaR estimates will be reliable because they are based on random values generated from an assumed distribution that is not affected by external events or time.

C : The VaR estimates will not be reliable because they are derived from the most current observations of the period that is characterized by higher volatility.

D : The VaR estimates will not be reliable because the IID bootstrap allows the possibility of future losses that are larger than those that have been realized in the past.