Free GARP FRM-Part-2 Exam Questions

Become GARP Certified with updated FRM-Part-2 exam questions and correct answers

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Total 503 Questions | Updated On: Nov 10, 2025

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Question 1

A bank employee has been manipulating suspense (transitory) accounts for a prolonged time, and this event was determined to be a significant operational incident. Which of the following time intervals in terms of the operational incident date is most likely to be the longest?

A : Date of reporting to date of accounting.

B : Date of occurrence to date of discovery.

C : Date of discovery to date of reporting.

D : Date of occurrence to date of reporting.

Answer: D

Question 2

Time steps that enter into the calculation of the number of days in the margin period of risk include all of the following except:

A : valuation/margin call.

B : settlement.

C : close-out and re-hedge.

D : posting collateral.

Answer: D

Question 3

Which of the following statements best describes a Gaussian copula?

A : A major disadvantage of a Gaussian copula model is the transformation of the original marginal distributions in order to define the correlation matrix.

B : The mapping of each variable to the new distribution is done by defining a mathematical relationship between marginal and unknown distributions.

C : A Gaussian copula maps the marginal distribution of each variable to the standard normal distribution.

D : A Gaussian copula is seldom used in financial models because ordinal numbers are required.

Answer: C

Question 4

An analyst at a financial institution has been asked to assess the quality ofestimating credit VaR (CVaR) of a homogenous portfolio of firms (credits) using thesingle-factor model, under which default correlation varies with the firm’s beta to themarket factor. The analyst examines the portfolio under the following assumptions:• There are 1,000 firms (credits) in the portfolio.• Each firm represents 0.1% of the portfolio.• There is no idiosyncratic risk.• Loss given default is the same for each firm in the portfolio.Based on the information provided, which of the following observations, if made bythe analyst, would be correct regarding the application of the single-factor model and its parameters?

A : either 0% or 100%.

B : factor is low, for a given probability of default.

C : beta.

D : is typically higher than the probability of default of a firm in the portfolio.

Answer: A

Question 5

An analyst at a commercial bank is evaluating how the bank applies historicalsimulation (HS) to estimate VaR and ES. The analyst focuses on the approachesused for weighting past return observations, including the age-weighted, volatilityweighted,correlation-weighted, and filtered HS approaches. Which of the followingstatements is correct regarding the given weighting approach?

A : customized based on day of the week, magnitude of return, or any other

B : portfolio returns so that these returns reflect current volatilities and current correlations.

C : increasing them if the historical volatility forecast was higher than the current

D : the cutoff date are given an equal weight while observations that occurred before

Answer: B

Page: 1 / 101

Total 503 Questions | Updated On: Nov 10, 2025

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