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 13, 2026

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Question 1

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

A : Market risk VaR is calculated over a longer time period than credit risk VaR.

B : Credit risk VaR is calculated over a longer time period than market risk VaR.

C : Both are calculated for one day.

D : Both are calculated for one year.

Answer: B

Question 2

A derivative trading firm sells a European-style call option on stock JKJ with a time to expiration of 9 months, a strike price of EUR 45, an underlying asset price of EUR 67, and implied annual volatility of 27%. The annual risk-free interest rate is 2.5%. What is the trading firm’s counterparty credit exposure from this transaction?

A : EUR 0

B : EUR 9.45

C : EUR 22.00

D : EUR 19.63

Answer: A

Question 3

The CRO of a regional mortgage lender has asked an enterprise risk manager todevelop a set of policies and procedures for the firm’s operational risk reporting. Themanager considers appropriate policies for the governance of the firm’s riskreporting framework and also assesses how the firm should structure its risk reportsfor different stakeholder groups and organizational functions. Which of the followingwould be most appropriate for the manager to recommend?

A : changes to the firm’s risk exposures after risk reports are reviewed.

B : board of directors than it does to business line managers to support the board’s

C : information from each of the business units about operational risk exposures.

D : backward-looking indicators in its risk reporting.

Answer: C

Question 4

An analyst at a commercial bank is evaluating how the bank applies historicalsimulation (HS) to estimate VaR and ES. The analyst focuses on the approachesused for weighting past return observations, including the age-weighted, volatilityweighted,correlation-weighted, and filtered HS approaches. Which of the followingstatements is correct regarding the given weighting approach?

A : customized based on day of the week, magnitude of return, or any other

B : portfolio returns so that these returns reflect current volatilities and current correlations.

C : increasing them if the historical volatility forecast was higher than the current

D : the cutoff date are given an equal weight while observations that occurred before

Answer: B

Question 5

Which of the following statements describes the best approach for liquidity transfer pricing?

A : The matched-maturity marginal approach is preferred because it quantifies liquidity risk premiums across all maturities.

B : The separate average cost of funds approach is preferred to accurately account for business units with large trading activities.

C : The pooled average cost of funds approach is more appropriate for banks with numerous business units.

D : Zero cost of funds approach is preferred in cases in which swap rates are unknown and undeterminable.

Answer: A

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Total 503 Questions | Updated On: Jan 13, 2026

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