Free GARP FRM-Part-2 Exam Questions

All of the following items are generally considered advantages of non-parametric estimation methods except:

Which of the following features is least likely a benefit of collateralization?

A fixed-income portfolio manager is conducting a performance analysis on anagency-MBS and the underlying pool of commercial mortgages. The managerobtains the following information:• The constant prepayment rate (CPR) of the commercial mortgages loan pool: 14.38%• Debt payments per year on the commercial mortgage loans: USD 730,000• Net operating income per year of the commercial mortgage property: USD 1,825,000The manager uses the following metrics as benchmarks for the commercial mortgage sector analysis:• Debt service coverage ratio (DSCR) of a benchmark obligor: 2.5• Single monthly mortality (SMM) rate of a benchmark security: 0.85%Which of the following statements is correct?

Given the following three events, what is the proper order of the CCP loss waterfall?I. Nondefaulting member’s default fund contributions are exhausted.II. Defaulting member’s collateral and default fund contributions are exhausted.III. CCP taps an amount of its equity that enables them to function normally.

A fund manager owns a portfolio of options on TUV, a non-dividend paying stock. The portfolio is made up of 5,000 deep in-the-money call options on TUV and 20,000 deep out-of-the-money call options on TUV. The portfolio also contains 10,000 forward contracts on TUV. Currently, TUV is trading at USD 52. Assuming 252 trading days in a year, the volatility of TUV is 12% per year, and that each of the option and forward contracts is on one share of TUV, which of the following amounts would be closest to the 1-day 99% VaR of the portfolio?