Free GARP FRM-Part-2 Exam Questions

Which of the following actions is not an advantage of the central counterparty (CCP) in the centralized clearing process?

Due to lack of available investment opportunities in public markets, a pension fund decided to hire an investment consultant to assess the potential for investing in illiquid markets in the US. Which of the following characteristics of illiquid markets in the US should the consultant present to the pension managers?

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

A senior risk analyst at VLT Bank (VLTB), a Singapore-based bank, is analyzing therisks arising from a significant appreciation of the SGD against all other major worldcurrencies. VLTB has the following balance sheet structure:▪ Assets:• Germany government bonds denominated in EUR• Singapore government bonds denominated in SGD• Corporate bonds denominated in EUR• Commercial loans denominated in SGD▪ Liabilities:• Long-term senior bonds denominated in EUR• Long-term senior bonds denominated in SGD• Retail deposits denominated in SGD• Corporate term deposits denominated in SGDThe analyst considers other recent market developments, including a decline inglobal equity prices, which resulted in many of VLTB’s larger retail depositorsexperiencing margin calls and drawing down deposits to meet them. The analystnotes that the bank took advantage of the demand for fixed-income securities andissued additional long-term senior SGD bonds and the proceed was used topurchase additional Germany government bonds. The overall impact of thesetransactions on VLTB is that the bank’s net cash outflows during the month, itsoverall net liabilities flow, and the required amount of stable funding, remainunchanged. The following additional information is provided:• The available stable funding (ASF) factor for retail deposits is 95%.• The ASF factor for long-term senior SGD bonds is 100%.The analyst also assesses the bank’s exposure to ConSol Corp, a publicly tradedSingapore manufacturer that is heavily dependent on locally produced raw materialsand generates its revenues primarily in EUR. VLTB is a major holder of ConSolCorp’s EUR-denominated bonds and has taken a long CDS position on the bonds.A German bank is the counterparty to that CDS contract.In analyzing the impact of the reported developments in the currency, equity, andbond markets on VLTB, which of the following is correct?

A senior risk analyst at VLT Bank (VLTB), a Singapore-based bank, is analyzing therisks arising from a significant appreciation of the SGD against all other major worldcurrencies. VLTB has the following balance sheet structure:▪ Assets:• Germany government bonds denominated in EUR• Singapore government bonds denominated in SGD• Corporate bonds denominated in EUR• Commercial loans denominated in SGD▪ Liabilities:• Long-term senior bonds denominated in EUR• Long-term senior bonds denominated in SGD• Retail deposits denominated in SGD• Corporate term deposits denominated in SGDThe analyst considers other recent market developments, including a decline inglobal equity prices, which resulted in many of VLTB’s larger retail depositorsexperiencing margin calls and drawing down deposits to meet them. The analystnotes that the bank took advantage of the demand for fixed-income securities andissued additional long-term senior SGD bonds and the proceed was used topurchase additional Germany government bonds. The overall impact of thesetransactions on VLTB is that the bank’s net cash outflows during the month, itsoverall net liabilities flow, and the required amount of stable funding, remainunchanged. The following additional information is provided:• The available stable funding (ASF) factor for retail deposits is 95%.• The ASF factor for long-term senior SGD bonds is 100%.The analyst also assesses the bank’s exposure to ConSol Corp, a publicly tradedSingapore manufacturer that is heavily dependent on locally produced raw materialsand generates its revenues primarily in EUR. VLTB is a major holder of ConSolCorp’s EUR-denominated bonds and has taken a long CDS position on the bonds.A German bank is the counterparty to that CDS contract.In analyzing the impact of the reported developments in the currency, equity, andbond markets on VLTB, which of the following is correct?