Free GARP FRM-Part-2 Exam Questions

If the unconditional default probability of a Ba-rated bond during Year 3 is 1.914% and the probability of survival through Year 2 is 97.413%, the probability of a default during Year 3, conditional on no earlier default, is closest to:

A model validation team at a bank is backtesting the bank’s VaR model. Inpreparation for the backtest, one of the team members expresses a concern that thevalidation process could result in the team committing a Type I error or a Type IIerror and discusses the characteristics of these errors with the team. Which of thefollowing is correct regarding Type I and Type II errors?

Which of the following statements most accurately reflects the time horizons typically used for market VaR and credit VaR calculations?

Which of the following statements about a stressed value at risk (VaR), required under Basel 2.5, is correct?

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?