Free GARP FRM-Part-2 Exam Questions

Which of the following risks is specifically recognized by the incremental risk charge (IRC)?

Suppose mean reversion exists for a variable with a value of 30 at time period t − 1. Assume that the long-run mean value for this variable is 40 and ignore the stochastic term included in most regressions of financial data. What is the expected change in value of the variable for the next period if the mean reversion rate is 0.4?

A bank is located near a college campus and would like to attract students to the bank. Which of the following conditional pricing demand deposit accounts would most likely appeal to a college student?

A group of newly hired investment analysts at a large wealth management firm isundergoing training on the company’s investment practices. Part of the trainingfocuses on hedge fund investments and addresses how the firm evaluates the riskmanagement processes and procedures of a hedge fund being considered forinvestment. The analysts learn that the firm performs comprehensive due diligenceon the hedge fund’s investment environment, as well as on its operationalenvironment and business practices. Which of the following is correct about a hedgefund investor’s due diligence on the operational environment of a hedge fund?

The CRO of a regional bank expresses concern in a meeting of the risk team thatthe bank’s internal risk models are not adequately assessing potential randomextreme losses. A risk analyst asks if implementing a model based on extremevalue theory (EVT) would address the CRO’s concern. Which of the following iscorrect when applying EVT and examining distributions of losses exceeding a threshold value?