Free GARP FRM-Part-2 Exam Questions

Time steps that enter into the calculation of the number of days in the margin period of risk include all of the following except:

The Merton model is different from Moody’s-KMV Expected Default Frequency approach in two key areas. Which of the following statements refers to one of those differences?

A risk analyst is considering the best method to generate a credit score that updates in near real-time while considering the payment and purchase history of a customer. Which of the following methods for developing credit risk scoring and rating models should he use?

Which of the following statements most accurately reflects the time horizons typically used for market VaR and credit VaR calculations?

A manager from the structured credit risk desk at a bank is presenting to a group ofnewly hired risk analysts on calculating cash flows in a securitization structure. Themanager illustrates the procedure with the existing collateral pool of loans and thecorresponding liabilities, all with a maturity of 5 years, using the following information:Initial number of loans in the collateral pool 100Principal amount of each loan EUR 1,000,000Total coupon interest to be paid annually on all junior and senior bonds EUR 6,300,000Maximum annual amount flowing from the excess spread into the overcollateralization account EUR 1,500,000Swap rate per year for all maturities 3.5%Recovery rate in the event of a loan default 45%The manager makes additional observations as follows:• The loans in the collateral pool pay a fixed spread of 2.2% over the swap curve.• There were no defaults in year 1.• The value of the overcollateralization account at the end of year 1 was EUR 0.What is the value of the overcollateralization account at the end of year 2 if there are 8 defaults in year 2?