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: Apr 03, 2026

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Question 1

At inception, the tranches in a synthetic CDO are priced to earn a spread that is:

A : higher for senior tranches, as they represent a larger notional principal.

B : aggregate in amount to the premium paid to binary CDSs.

C : consistent with their seniority.

D : equal for each tranche.

Answer: C

Question 2

Which of the following statements regarding risk assessment is most accurate?

A : Risk and control self-assessments (RCSAs) are a good mixture of qualitative and quantitative aspects.

B : The main purpose of risk assessment is to prioritize risk management and risk mitigation responses.

C : When backtesting the results of risk assessment against past incident experience, there is a tendency to underestimate the impact of an operational risk event.

D : When backtesting the results of risk assessment against past incident experience, there is a tendency to overestimate the likelihood of an operational risk event.

Answer: B

Question 3

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

Question 4

Firm A has $1 billion in highly liquid assets. In a sudden stressed scenario, it estimates that retail customers will withdraw $150 million in deposits, and retail customers will be able to make $80 million of loan repayments. Firm A must deal with $60 million of margin and collateral calls on its derivatives transactions due to falling collateral values and greater volatility of the underlying assets. In addition, the firm has utilized $90 million of its available $100 million liquidity facility. What is the estimate of Firm A’s stressed liquidity asset buffer?

A : $0.80 billion.

B : $0.88 billion.

C : $0.96 billion.

D : $0.90 billion.

Answer: C

Question 5

Unconditional testing does not reflect the:

A : timing of the exceptions.

B : size of the portfolio.

C : number of exceptions.

D : confidence level chosen.

Answer: A

Page: 1 / 101

Total 503 Questions | Updated On: Apr 03, 2026

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