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: Jan 13, 2026

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Question 1

Which of the following statements is most accurate regarding risks incurred by retail lenders?

A : Refinancing a mortgage when rates decrease is an example of asset valuation risk.

B : Reputation risk is more of a concern for the borrower rather than the lender.

C : Credit risk relates to the potential for a lender to default on their obligation.

D : Business risk relates to the day-to-day operational risks of the business.

Answer: A

Question 2

Which of the following measures is most likely an example of a dynamic financial correlation measure?

A : Pairs trading.

B : Copula correlations for collateralized debt obligations (CDOs).

C : Binomial default correlation model.

D : Value at risk (VaR).

Answer: A

Question 3

All of the following items are generally considered advantages of non-parametric estimation methods except:

A : ability to accommodate skewed data.

B : availability of data.

C : little or no reliance on covariance matrices.

D : use of historical data.

Answer: D

Question 4

Which of the following statements about expected loss (EL) and unexpected loss (UL) is true?

A : Expected loss always exceeds unexpected loss.

B : Unexpected loss always exceeds expected loss.

C : EL and UL are parameterized by the exact same set of variables.

D : Expected loss is directly related to exposure.

Answer: D

Question 5

Assuming a loan portfolio of L, a recovery rate of RR, and the percentage of losses on a portfolio less than V(T, X), which of the following formulas is used to estimate credit VaR?

A : L × (1 − RR) × V(T, X).

B : L × (1 − RR) / V(T, X).

C : L × (RR) × V(T, X).

D : V(T, X) / [L × (1 − RR)].

Answer: A

Page: 1 / 101

Total 503 Questions | Updated On: Jan 13, 2026

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