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

Unconditional testing does not reflect the:

A : timing of the exceptions.

B : size of the portfolio.

C : number of exceptions.

D : confidence level chosen.

Answer: A

Question 2

At inception, the tranches in a synthetic CDO are priced to earn a spread that is:

A : higher for senior tranches, as they represent a larger notional principal.

B : aggregate in amount to the premium paid to binary CDSs.

C : consistent with their seniority.

D : equal for each tranche.

Answer: C

Question 3

An analyst at a financial institution has been asked to assess the quality ofestimating credit VaR (CVaR) of a homogenous portfolio of firms (credits) using thesingle-factor model, under which default correlation varies with the firm’s beta to themarket factor. The analyst examines the portfolio under the following assumptions:• There are 1,000 firms (credits) in the portfolio.• Each firm represents 0.1% of the portfolio.• There is no idiosyncratic risk.• Loss given default is the same for each firm in the portfolio.Based on the information provided, which of the following observations, if made bythe analyst, would be correct regarding the application of the single-factor model and its parameters?

A : either 0% or 100%.

B : factor is low, for a given probability of default.

C : beta.

D : is typically higher than the probability of default of a firm in the portfolio.

Answer: A

Question 4

Which of the following statements regarding the differences between Basel I, Basel II.5, and the Fundamental Review of the Trading Book (FRTB) for market risk capital calculations is incorrect?

A : FRTB requires the calculation of expected shortfall with a 97.5% confidence level.

B : Both Basel I and Basel II.5 require calculation of VaR with a 99% confidence level.

C : FRTB requires adding a stressed VaR measure to complement the expected shortfall calculation.

D : The 10-day time horizon for market risk capital proposed under Basel I incorporates a recent period of time, which typically ranges from one to four years.

Answer: C

Question 5

The treatment of tenor for certain types of cash flows for liquidity reporting is a concern for senior managers preparing reports for the Financial Services Authority (FSA) in the United Kingdom (UK). Based on recommendations of the FSA, what should be the treatment in liquidity reports for callable or demand deposits that have no maturity date?

A : 1 month.

B : 1 week.

C : 1 year.

D : 1 day.

Answer: D

Page: 1 / 101

Total 503 Questions | Updated On: Apr 03, 2026

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