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 29, 2026

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Question 1

A risk manager is trying to estimate the default time for asset i based on the default copula correlation of asset i to n assets. Which of the following equations best defines the process that the risk manager should use to generate and map random samples to estimate the default time?

A : CGD[QB(t),QC(t)] = M2[N−1(QB(t)), N−1(QC(t)) ; ρ].

B : −1(G1(u1)),…,Fn

C : Mn(•) = Qi(τi).

D : −1(Q1(t)),…,Nn

Answer: A

Question 2

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?

A : During the 2008-2009 Financial Crisis, liquidity dried up in repo markets but not in commercial paper markets.

B : The traditional public, liquid markets of stocks and bonds are larger than the total wealth held in illiquid assets.

C : The share of illiquid assets in institutional portfolios has generally gone up in the past 2 decades.

D : Municipal bonds are usually more liquid than pinksheet over-the-counter equities.

Answer: C

Question 3

A bank employee has been manipulating suspense (transitory) accounts for a prolonged time, and this event was determined to be a significant operational incident. Which of the following time intervals in terms of the operational incident date is most likely to be the longest?

A : Date of reporting to date of accounting.

B : Date of occurrence to date of discovery.

C : Date of discovery to date of reporting.

D : Date of occurrence to date of reporting.

Answer: D

Question 4

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.

A : I only.

B : Both I and II.

C : II only.

D : Neither I nor II.

Answer: A

Question 5

A junior risk analyst at a consulting firm is reviewing the operational arrangements of bilateral netting and central clearing of derivative trades. The analyst examines the following bilateral trades of three firms:• Firm 1’s exposure to Firm 2: AUD 90 million• Firm 2’s exposure to Firm 1: AUD 60 million• Firm 1’s exposure to Firm 3: AUD 12 million• Firm 3’s exposure to Firm 1: AUD 70 million• Firm 2’s exposure to Firm 3: AUD 57 million• Firm 3’s exposure to Firm 2: AUD 0 millionWhich of the following statements is correct?

A : Under bilateral netting, Firm 1’s net exposure is AUD 28 million.

B : Under bilateral netting, Firm 2’s net exposure is AUD 27 million.

C : Under central clearing, the CCP’s net exposure is AUD 28 million.

D : Under central clearing, Firm 3’s net exposure is AUD 0 million.

Answer: C

Page: 1 / 101

Total 503 Questions | Updated On: Jan 29, 2026

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