Free GARP FRM-Part-2 Exam Questions

Unconditional testing does not reflect the:

The board of directors of a fast-growing US-based bank is discussing a report offindings and recommendations issued after a recent regulatory review of the bank’srisk management framework. A board member notes that the regulators haveidentified deficiencies in the bank’s model validation process, and recommends thatthe CRO develop a plan for improvement in this area. The CRO consults theFederal Reserve guidelines for examples of best practices, and identifies ways thatthe bank can improve its validation approaches to conform with the guidelines.Which of the following recommendations is appropriate for the CRO to make?

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:

Which of the following statements regarding the computation of economic capital is correct?I. Selecting a longer time horizon for RAROC calculations is preferable because risk and return data is more reliable with more time.II. Choosing a lower confidence level will not likely reduce the amount of risk capital required if the firm has little exposure to operational, credit, and settlement risks.

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