Free GARP FRM-Part-2 Exam Questions

A derivative trading firm sells a European-style call option on stock JKJ with a time to expiration of 9 months, a strike price of EUR 45, an underlying asset price of EUR 67, and implied annual volatility of 27%. The annual risk-free interest rate is 2.5%. What is the trading firm’s counterparty credit exposure from this transaction?

An investment bank has a one-way credit support annex (CSA) on a bilateral transaction with a hedge fund counterparty. Under the terms of the CSA, the mark-to-market value of the transaction forms the basis of the hedge fund’s collateral requirements, 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-market value of collateral posted has not changed, how much additional collateral will the hedge fund have to post?

Following the Credit Suisse crisis in 2023, regulators and market participants werecaught off guard by the full write-down of CoCos. What was the immediate market impact andreaction to the unexpected write-down of Credit Suisse's Additional Tier 1 (AT1) bonds, and howdoes it compare to the market reaction to the Bear Stearns rescue in 2008?

Bank, Inc., (Bank) operates in the United States and has a service contract in place with Service Co. (Service), which operates in France. Service manages a significant amount of confidential customer data for Bank, and recently a computer glitch at Service resulted in the accidental public disclosure of confidential customer data. As a result of the data breach, which of the following risks is Bank least likely to face?

A newly hired risk analyst at a large investment bank is examining how financial correlation risk affects the bank’s portfolios. The bank holds portfolios consisting of different types of assets and enters into various hedging contracts with multiple counterparties. Which of the following statements would the analyst be correct to make?