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

Which of the following reasons is least likely a consideration for regulators when imposing fines on financial institutions against financial breaches and violations?

A : To cover the cost of litigation.

B : To deter other firms against manipulative bank practices.

C : To ensure that fines cover at least the benefits of breaches.

D : To signal to other firms to change their compliance practices.

Answer: A

Question 2

A significant challenge in estimating the legal loss module of an operational risk stress test is that:

A : there is a lag between the macroeconomic event itself and the incurrence of legal losses.

B : banks are minimally impacted by legal losses.

C : future litigation cases cannot be estimated.

D : operational risks and legal losses cannot be separated.

Answer: A

Question 3

Country X’s banking regulator established sector-specific cybersecurity requirements. This most likely indicates that Country X is a(n):

A : emerging economy with a homogenous banking system.

B : developed economy with a homogenous banking system.

C : emerging economy with a fragmented banking system.

D : developed economy with a fragmented banking system.

Answer: A

Question 4

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 5

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

Page: 1 / 101

Total 503 Questions | Updated On: Apr 03, 2026

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