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

A group of risk managers in a newly established asset management firm is assignedto implement the risk management process that includes three fundamentaldimensions: risk planning, risk budgeting and risk monitoring. The managers startby discussing the components of and the guidelines included in the risk plan. Whichof the following statements is correct?

A : on risk capital for each allocation taken independently.

B : that can cause aspects of the risk plan to fail.

C : be included in its strategic plan.

D : organization’s key dependencies on these goals.

Answer: B

Question 2

The Black-Scholes-Merton option pricing model is not appropriate for valuing options on corporate bonds because corporate bonds:

A : have credit risk.

B : have an upper price bound.

C : are not priced by arbitrage.

D : have constant price volatility.

Answer: B

Question 3

Which of the following reasons is least likely a consideration for regulators when imposing fines on financial institutions against financial breaches and violations?

A : To cover the cost of litigation.

B : To deter other firms against manipulative bank practices.

C : To ensure that fines cover at least the benefits of breaches.

D : To signal to other firms to change their compliance practices.

Answer: A

Question 4

An option pricing analyst at an investment bank has been asked to write a reportexamining the relationship between option prices and implied volatility curves. Theanalyst notes that the implied volatility curves of different underlying assets oftenhave different shapes and explains the reasons why this occurs. Which of thefollowing statements can correctly be included in the report?

A : prices in out-of-the-money puts relative to out-of-the-money calls, which creates a

B : announcements on foreign exchange rates leads to higher prices, and higher

C : to the higher probability of a price change of between one and two standard

D : probability of a greater than three standard deviation price change than would be

Answer: A

Question 5

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

A : Counterparty risk pricing should account for risk mitigants.

B : Pricing bilateral derivatives contracts.

C : Best practices organize pricing responsibilities in the organization.

D : Accurate pricing should only account for the cost of the trade.

Answer: D

Page: 1 / 101

Total 503 Questions | Updated On: Jan 13, 2026

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