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: Apr 03, 2026

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Question 1

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

Question 2

A researcher at a national regulatory agency is examining the use of thestandardized ratings-based approach (SA) and the advanced internal ratingsbased(A-IRB) approach in determining credit risk capital. The researcherevaluates the implications of applying these approaches on two different banks,Global Bank and Resource Bank. Information about the credit exposures of the two banks is provided below:• Global Bank lends to large global corporations that have highly diversebusiness lines by providing sizable long-dated unsecured credit facilities.• Resource Bank lends to oil and gas producers in its region, most of which have small-scale operations.Which of the following is the most appropriate conclusion for the researcher to reach?

A : undercapitalize the long-dated exposures at Global Bank.

B : that is likely to exist between Resource Bank’s lending counterparties.

C : while using a probability of default specified by the Basel committee.

D : lower, which may incentivize Resource Bank to lend to unrated companies with

Answer: D

Question 3

Which of the following statements regarding risk management programs with service providers to manage outsourcing risk is correct?

A : The program should contain more detail if there are only a few outsourced activities to established service providers.

B : The program should focus on business continuity and contingency plans.

C : The program should contain adequate oversight and controls over all activities that impact the financial institution.

D : The program should require risk assessments to be updated as a result of updated risk mitigation techniques on a sufficiently regular basis.

Answer: B

Question 4

Which of the following statements describes the best approach for liquidity transfer pricing?

A : The matched-maturity marginal approach is preferred because it quantifies liquidity risk premiums across all maturities.

B : The separate average cost of funds approach is preferred to accurately account for business units with large trading activities.

C : The pooled average cost of funds approach is more appropriate for banks with numerous business units.

D : Zero cost of funds approach is preferred in cases in which swap rates are unknown and undeterminable.

Answer: A

Question 5

If portfolio assets are perfectly correlated, portfolio VaR will equal:

A : component VaR.

B : undiversified VaR.

C : marginal VaR.

D : diversified VaR.

Answer: B

Page: 1 / 101

Total 503 Questions | Updated On: Apr 03, 2026

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