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 04, 2026

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Question 1

Imagine you are a risk manager at a mid-sized commercial bank that has experienced rapid growth over the past three years. Your bank, similar to Silicon Valley Bank (SVB), has asignificant reliance on uninsured deposits and a concentrated customer base. Given the recentfailure of SVB, primarily attributed to liquidity risk management deficiencies, your CEO hastasked you with reviewing and strengthening the bank’s liquidity risk management framework.Your review reveals several areas that mirror SVB’s situation, particularly concerning internalliquidity stress testing (ILST), the modeling of a 30-day liquidity buffer, and management'sresponsiveness to liquidity challenges. Based on the lessons learned from SVB's failure, which ofthe following actions should you prioritize to improve your bank’s liquidity risk management?

A : during the bank's growth phase.

B : enhance the 30-day liquidity buffer with a diverse range of highly liquid assets.

C : are manageable due to the bank's recent growth and success.

D : internal changes to the current risk management framework.

Answer: B

Question 2

A regional bank wants to improve its operational resilience to help keep pace with emerging best practices in this area. A consultant hired by the bank recommends that it establish a set of impact tolerances to improve its resilience. Which of the following correctly describes a potential benefit to the bank of establishing an impact tolerance?

A : It will help the bank optimize its allocation of resources to its most important business services.

B : It will enhance the bank’s ability to identify and limit concentration risk.

C : It will accurately estimate the severity of a potential disruption to an operational process and the amount of downtime that would result.

D : It will prevent failures of critical operational processes and the systems that support these processes.

Answer: A

Question 3

A junior risk analyst at a consulting firm is reviewing the operational arrangements of bilateral netting and central clearing of derivative trades. The analyst examines the following bilateral trades of three firms:• Firm 1’s exposure to Firm 2: AUD 90 million• Firm 2’s exposure to Firm 1: AUD 60 million• Firm 1’s exposure to Firm 3: AUD 12 million• Firm 3’s exposure to Firm 1: AUD 70 million• Firm 2’s exposure to Firm 3: AUD 57 million• Firm 3’s exposure to Firm 2: AUD 0 millionWhich of the following statements is correct?

A : Under bilateral netting, Firm 1’s net exposure is AUD 28 million.

B : Under bilateral netting, Firm 2’s net exposure is AUD 27 million.

C : Under central clearing, the CCP’s net exposure is AUD 28 million.

D : Under central clearing, Firm 3’s net exposure is AUD 0 million.

Answer: C

Question 4

All of the following items are generally considered advantages of non-parametric estimation methods except:

A : ability to accommodate skewed data.

B : availability of data.

C : little or no reliance on covariance matrices.

D : use of historical data.

Answer: D

Question 5

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

Page: 1 / 101

Total 503 Questions | Updated On: Jan 04, 2026

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