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: Mar 26, 2026

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Question 1

Time steps that enter into the calculation of the number of days in the margin period of risk include all of the following except:

A : valuation/margin call.

B : settlement.

C : close-out and re-hedge.

D : posting collateral.

Answer: D

Question 2

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 : The filtered HS approach allows the historical returns data to be trimmed orcustomized based on day of the week, magnitude of return, or any othercharacteristic of the data.

B : The correlation-weighted approach uses matrix multiplication to adjust historicalportfolio returns so that these returns reflect current volatilities and current correlations.

C : The volatility-weighted approach adjusts historical returns in the sample byincreasing them if the historical volatility forecast was higher than the currentvolatility forecast, and decreasing them if the historical volatility forecast was lowerthan the current volatility forecast.

D : The age-weighted approach typically specifies that observations that occurred afterthe cutoff date are given an equal weight while observations that occurred beforethe cutoff date are given a weight of zero.

Answer: B

Question 3

In the context of arbitrage trades, if the CDS spread is significantly greater than the bond yield spread, what is the most appropriate action by the investor?

A : Buy the corporate bond and buy CDS protection.

B : Sell the corporate bond and sell CDS protection.

C : Buy the corporate bond and sell CDS protection.

D : Sell the corporate bond and buy CDS protection.

Answer: B

Question 4

Following the Credit Suisse crisis in 2023, regulators and market participants werecaught off guard by the full write-down of CoCos. What was the immediate market impact andreaction to the unexpected write-down of Credit Suisse's Additional Tier 1 (AT1) bonds, and howdoes it compare to the market reaction to the Bear Stearns rescue in 2008?

A : value conservation in the decision-making process of the respective rescues.

B : consternation due to the perceived violation of the creditor hierarchy, in contrast to Bear

C : resolution provided, akin to the response to Bear Stearns' bailout.

D : market enthusiasm, as investors favored regulatory interventions that preserved their investments.

Answer: B

Question 5

A risk analyst is reviewing his bank’s credit risk management policies. He notes that banks have limits on related-party financing decisions. His colleague agrees and correctly adds that:

A : the term single client only refers to a legal person.

B : acceptances and letters of credit should be factored into the risk exposure of a single client.

C : all banks have a limit of 10% of capital for a single client.

D : loan collateral should be included in exposure sizing using mark-to-market principles.

Answer: B

Page: 1 / 101

Total 503 Questions | Updated On: Mar 26, 2026

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