Free GARP FRM-Part-2 Exam Questions

A bank is assessing the impact of a new transaction on CVA and DVA. If the new transaction is negatively correlated to existing transactions, the impact will likely be a(n):

Which of the following statements about portfolio losses and default correlation are most likely correct?I. Increasing default correlation decreases senior tranche values but increases equity tranche values.II. At high default rates, increasing default correlation decreases mezzanine bond prices.

Which of the following trading instruments would have the most beneficial effect on netting?

Imagine you are a risk manager at a mid-sized commercial bank that has experienced rapid growth over the past three years. Your bank, similar to Silicon Valley Bank (SVB), has asignificant reliance on uninsured deposits and a concentrated customer base. Given the recentfailure of SVB, primarily attributed to liquidity risk management deficiencies, your CEO hastasked you with reviewing and strengthening the bank’s liquidity risk management framework.Your review reveals several areas that mirror SVB’s situation, particularly concerning internalliquidity stress testing (ILST), the modeling of a 30-day liquidity buffer, and management'sresponsiveness to liquidity challenges. Based on the lessons learned from SVB's failure, which ofthe following actions should you prioritize to improve your bank’s liquidity risk management?

Due to lack of available investment opportunities in public markets, a pension fund decided to hire an investment consultant to assess the potential for investing in illiquid markets in the US. Which of the following characteristics of illiquid markets in the US should the consultant present to the pension managers?