Free GARP FRM-Part-2 Exam Questions

The CRO of a regional bank expresses concern in a meeting of the risk team thatthe bank’s internal risk models are not adequately assessing potential randomextreme losses. A risk analyst asks if implementing a model based on extremevalue theory (EVT) would address the CRO’s concern. Which of the following iscorrect when applying EVT and examining distributions of losses exceeding a threshold value?

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?

Which of the following statements is not a motivation for pricing counterparty risk?

An operational risk analyst at a large bank is preparing a year-end report of thebank’s operational loss events. The analyst uses the Basel operational risktaxonomy to classify different events into Level 1, Level 2, and Level 3. As part ofthis process, the analyst considers the following four events that occurred during the year:• A sales representative in the lending department forged a senior manager’ssignature to approve an application for a large commercial loan that defaulted.• The bank failed to deliver sufficient collateral to support a swap position,which was later terminated at a loss.• Several managers in the bank’s wealth management group were found tohave misused confidential customer information by sharing this informationwith other employees and a third-party vendor representative.• Some personal customer information was stolen in a cyber-attack in whichan external hacker broke into a database stored in the cloud.In classifying the four events and considering the Basel taxonomy in general, whichof the following actions would be most appropriate for the analyst to take?

A bank treasurer is seeking to identify the most appropriate investment maturitystrategy to apply considering the status of its balance sheet and the economicconditions it is currently facing. The treasurer gathers the following information:• The bank faces a high interest rate environment with a flat yield curve.• The bank’s asset mix includes a high proportion of US Treasury bondspurchased years ago when interest rates were significantly lower.• The bank has a high proportion of revenues from loans and anticipates arecord high level of profitability this year.Which of the following strategies would be the most appropriate for the bank to takein order to maintain its current level of total income?