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 18, 2024

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Question 1

Banks are required to rebalance their portfolios as the creditworthiness of bonds decline, leading to losses over time but generally not to outright default. This requirement to specify a liquidity horizon for each instrument in the portfolio and rebalance at the end of the liquidity horizon is part of the:

A : comprehensive risk charge calculation.

B : incremental risk charge calculation.

C : countercyclical buffer estimation.

D : net stable funding charge formula.

Answer: B

Question 2

Country X’s banking regulator established sector-specific cybersecurity requirements. This most likely indicates that Country X is a(n):

A : emerging economy with a homogenous banking system.

B : developed economy with a homogenous banking system.

C : emerging economy with a fragmented banking system.

D : developed economy with a fragmented banking system.

Answer: A

Question 3

A large bank is reviewing its processes and procedures to manage operational risk in accordance with best practices established by the Basel Committee. In implementing the three lines of defense model, which of the following statements is correct?

A : The corporate operational risk function, as part of the second line of defense, should challenge risk inputs from business line managers.

B : The internal audit function should serve as the first line of defense and continually validate operational procedures used by the business lines.

C : The corporate operational risk function should serve as the third line of defense and validate model assumptions made by senior management.

D : Business line managers, as part of the first line of defense, should provide a credible challenge to the internal audit function.

Answer: A

Question 4

The Black-Scholes-Merton option pricing model is not appropriate for valuing options on corporate bonds because corporate bonds:

A : have credit risk.

B : have an upper price bound.

C : are not priced by arbitrage.

D : have constant price volatility.

Answer: B

Question 5

An option pricing analyst at an investment bank has been asked to write a reportexamining the relationship between option prices and implied volatility curves. Theanalyst notes that the implied volatility curves of different underlying assets oftenhave different shapes and explains the reasons why this occurs. Which of thefollowing statements can correctly be included in the report?

A : prices in out-of-the-money puts relative to out-of-the-money calls, which creates a

B : announcements on foreign exchange rates leads to higher prices, and higher

C : to the higher probability of a price change of between one and two standard

D : probability of a greater than three standard deviation price change than would be

Answer: A

Page: 1 / 101

Total 503 Questions | Updated On: Nov 18, 2024

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