Free GARP FRM-Part-2 Exam Questions

A junior risk analyst at a consulting firm is reviewing the operational arrangements of bilateral netting and central clearing of derivative trades. The analyst examines the following bilateral trades of three firms:• Firm 1’s exposure to Firm 2: AUD 90 million• Firm 2’s exposure to Firm 1: AUD 60 million• Firm 1’s exposure to Firm 3: AUD 12 million• Firm 3’s exposure to Firm 1: AUD 70 million• Firm 2’s exposure to Firm 3: AUD 57 million• Firm 3’s exposure to Firm 2: AUD 0 millionWhich of the following statements is correct?

As part of a broader assessment of migration risk, a risk analyst at a rating agency examines the observed defaults of a given rating class of corporate issuers. The rating class contained 348 names (number of issuers) at the end of 2016, which was the time of origination. The number of issuers that have not defaulted over the past 3 years is shown in the table below:Year AND Number of non-defaulted names at end of year2016: 3482017: 3392018: 3332019: 329Assuming no new issuers were added to the rating class throughout the holding period, what is the estimate of the 1-year marginal probability of default in the year 2019?

An investment bank has a one-way credit support annex (CSA) on a bilateraltransaction with a hedge fund counterparty. Under the terms of the CSA, the markto-market value of the transaction forms the basis of the hedge fund’s collateralrequirements, which are provided below:Value (CNY)Mark-to-market value of net exposure 25,000,000Mark-to-market value of collateral posted 10,800,000Threshold amount 14,000,000Minimum transfer amount 2,500,000Rounding amount 10,000Assuming the net exposure increases to CNY 27,000,000 and the mark-to-marketvalue of collateral posted has not changed, how much additional collateral will the hedge fund have to post?

A regional bank wants to improve its operational resilience to help keep pace with emerging best practices in this area. A consultant hired by the bank recommends that it establish a set of impact tolerances to improve its resilience. Which of the following correctly describes a potential benefit to the bank of establishing an impact tolerance?

A pension fund has $100,000 in assets and $90,000 in liabilities. Assume that theexpected return on the surplus is 5%, and the annual VaR of the surplus is 22% at the 99%confidence level.The initial surplus of the fund is equal to: