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 29, 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

A regulatory analyst at a large multinational bank is examining regulatory requirements the bank must comply with under the Basel Committee’s FRTB guidelines. The analyst explores how the FRTB guidelines evolved from the Basel I and Basel II.5 frameworks as well as the instructions for applying the guidelines. Which of the following is correct regarding the FRTB?

A : While Basel I and Basel II.5 emphasized the use of a standardized approach to calculating market risk, FRTB encourages each bank to develop and rely on an internal models approach.

B : While Basel I and Basel II.5 allowed market risk to be calculated at the trading desk level, FRTB requiresthat market risk be calculated on a firm-wide basis.

C : FRTB standardizes the liquidity horizon used for all risk factors in the market risk capital calculation as 10days, rather than the different horizons used in Basel I and Basel II.5.

D : FRTB requires that the stressed ES measure be used in determining market risk capital, rather than the VaR and stressed VaR measures that were used in Basel I and Basel II.5, respectively.

Answer: D

Question 3

A risk analyst is implementing an enterprise risk management system at a bank. During the process, the analyst takes an inventory of risks faced by the bank and categorizes these risks as market, credit, or operational risks. Which of the following observations of the bank’s data should be considered unexpected if compared to similar industry data?

A : The operational risk loss distribution is symmetric and fat-tailed.

B : The operational risk loss distribution has many small losses, and therefore a relatively low mode.

C : The market risk distribution is symmetric.

D : The credit risk distribution is asymmetric and fat-tailed.

Answer: A

Question 4

The CRO of a regional mortgage lender has asked an enterprise risk manager todevelop a set of policies and procedures for the firm’s operational risk reporting. Themanager considers appropriate policies for the governance of the firm’s riskreporting framework and also assesses how the firm should structure its risk reportsfor different stakeholder groups and organizational functions. Which of the followingwould be most appropriate for the manager to recommend?

A : changes to the firm’s risk exposures after risk reports are reviewed.

B : board of directors than it does to business line managers to support the board’s

C : information from each of the business units about operational risk exposures.

D : backward-looking indicators in its risk reporting.

Answer: C

Question 5

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

Page: 1 / 101

Total 503 Questions | Updated On: Jan 29, 2026

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