Latest 2016-FRR exam dumps with real GARP questions and answers
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The Global Association of Risk Professionals (GARP) is a non-profit organization that specializes in developing and promoting best practices in the field of risk management. GARP offers a variety of educational programs and certification exams to help professionals develop their skills and advance their careers in the field of risk management. One of the most popular certification exams offered by GARP is the Financial Risk and Regulation (FRR) Series.
Which documents are required, on the day of the GARP 2016-FRR Certification
Documents required of the day of the GARP 2016-FRR Certification are a GARP member card and your government-issued identification (Passport/Driver's license/National ID card), as elaborated by 2016-FRR exam dumps. A dump of GARP FRR certification queries with answers and the right answers will be posted here before you take it. Please remember to study them. Existing users like the Saien, lib, più, Che, Regex, Cosa, Httrack, and UNA have uploaded the full guides on GARP 2016-FRR Certification for candidates taking it online.
NEW QUESTION # 141
The Treasury function of a bank typically manages all of the following components EXCEPT:
- A. Bank's assets and liabilities
- B. Bank's performance estimates
- C. Bank's capital
- D. Bank's liquidity
Answer: B
NEW QUESTION # 142
Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?
- A. Effective repricing date can be different than contractual repricing.
- B. Net interest income risk does not address the impact of changing interest rates on bank equity value.
- C. The amount of intermediated funds can be a function of interest rate levels.
- D. Assets and liabilities have the same interest rate sensitivities.
Answer: D
NEW QUESTION # 143
Using the definitions used by JPMorgan Chase in their annual report, which of the following exposure types
would be considered as a non-trading risk exposure?
I. Short term equity investments
II. Loans held to maturity
III. Mortgage servicing rights
IV. Derivatives used to manage asset/liability exposure.
- A. I and II
- B. III and IV
- C. II, III, and IV
- D. II and III
Answer: C
NEW QUESTION # 144
Which of the following statements explain how securitization makes the retail assets highly liquid and the
balance sheet easier to manage?
I. By securitizing assets any lack of capital can be accommodated by selling the securitized bonds.
II. Any need to diversify credit risk can be achieved by selling bank's own securitized bonds and buying other
bonds that increase diversification.
III. Securitization could be used to promote hedging by using limited market instruments.
- A. II
- B. II, III
- C. I, II
- D. I, II, III
Answer: C
NEW QUESTION # 145
ThetaBank has extended substantial financing to two mortgage companies, which these mortgage lenders use
to finance their own lending. Individually, each of the mortgage companies has an exposure at default (EAD)
of $20 million, with a loss given default (LGD) of 100%, and a probability of default of 10%. ThetaBank's risk
department predicts the joint probability of default at 5%. If the default risk of these mortgage companies were
modeled as independent risks, what would be the probability of a cumulative $40 million loss from these two
mortgage borrowers?
- A. 0.01%
- B. 10%
- C. 1%
- D. 0.1%
Answer: C
NEW QUESTION # 146
Which one of the following four option types has two strike prices?
- A. American options
- B. Asian options
- C. Shout options
- D. Range options
Answer: C
NEW QUESTION # 147
Which of the following bank events could stress the bank's liquidity position?
I. Maturing of bank debt
II. Repurchase agreements
III. Futures margins
IV. Staff turnover
- A. III, IV
- B. IV
- C. I, II
- D. I, II and III
Answer: D
NEW QUESTION # 148
Which one of the four following activities is NOT a component of the daily VaR computing process?
- A. Computing portfolio risk by delta-normal or delta-gamma method.
- B. Updating individual risk factor models.
- C. Updating factor interrelationships.
- D. Producing the VaR report.
Answer: A
NEW QUESTION # 149
Gamma Bank is operating in a highly volatile interest rate environment and wants to stabilize its net income
by shifting the sources of its earnings from interest rate sensitive sources to less interest rate sensitive sources.
All of the following strategies can help achieve this objective EXCEPT:
- A. Originate more floating interest rate loans
- B. Extend different types of credit
- C. Charge bank fees for underwriting loans
- D. Provide trust, asset management, and trading services to customers
Answer: A
NEW QUESTION # 150
For a bank a 1-year VaR of USD 10 million at 95% confidence level means that:
- A. There is a 5% chance that the bank would lose more than USD 10 million in a year.
- B. There is a 5% chance that the least loss would be USD 10 million in a year.
- C. There is a 5% chance that the bank would lose less than USD 10 million in a year.
- D. There is a 5% chance that the worst loss would be USD 10 million in a year.
Answer: A
NEW QUESTION # 151
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with
another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As
prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while
the risk of loss to the other large bank will increase. By running the trades through a clearinghouse, the small
bank can achieve all of the following objectives EXCEPT:
- A. Protecting against the risk of the failure of one of the large banks
- B. Mitigating option hedging risks and altering margin requirement
- C. Eliminating the collateral requirement
- D. Protecting itself against increases in future collateral demands
Answer: B
NEW QUESTION # 152
The value of which one of the following four option types is typically dependent on both the final price of its
underlying asset and its own price history?
- A. Basket options
- B. Stout options
- C. Power options
- D. Chooser options
Answer: B
NEW QUESTION # 153
Which one of the following statements regarding collateralized mortgage obligations (CMO) is incorrect?
- A. CMOs are pools of mortgages that are divided according to the timing of cash flows.
- B. CMOs are generally less risky investment than CDOs.
- C. CMOs are asset-backed securities that have pools of collateralized debt obligations (CDOs) as
underlying collateral. - D. CMOs have senior tranches which are considered short-term, low-risk instruments by banks
Answer: C
NEW QUESTION # 154
Gamma Bank is active in loan underwriting and securitization business, and given its collective credit
exposure, it will be typically most interested in the following types of portfolio credit risk:
I. Expected loss
II. Duration
III. Unexpected loss
IV. Factor sensitivities
- A. II
- B. I, III, IV
- C. I, III
- D. I
Answer: B
NEW QUESTION # 155
A risk manager has a long forward position of USD 1 million but the option portfolio decreases JPY 0.50 for
every JPY 1 increase in his forward position. At first approximation, what is the overall result of the options
positions?
- A. The option positions hedge the forward position by 50%.
- B. The option positions hedge the forward position by 75%.
- C. The option positions hedge the forward position by 100%.
- D. The options positions hedge the forward position by 25%.
Answer: A
NEW QUESTION # 156
10 basis points are equal to:
- A. 0.01%
- B. 10%
- C. 0.1%
- D. 1%
Answer: C
NEW QUESTION # 157
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year
no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate
spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both
interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta
defaults, the bank expects to lose 50% of its promised payment. What interest rate should Alpha Bank charge
on the no-payment loan to Delta Industrial Machinery Corporation?
- A. 12%
- B. 9%
- C. 8%
- D. 10%
Answer: D
NEW QUESTION # 158
A credit portfolio manager analyzes a large retail credit portfolio. Which of the following factors will represent
typical disadvantages of market-linked credit risk drivers?
I. Need to supply a large number of input parameters to the model
II. Slow computation speed due to higher simulation complexity
III. Non-linear nature of the model applicable to a specific type of credit portfolios
IV. Need to estimate a large number of unknown variable and use approximations
- A. III, IV
- B. II, III
- C. I, II
- D. I
Answer: C
NEW QUESTION # 159
An asset and liability manager for a large financial institution has to recognize that retail products ___ include
embedded options, which are often not rationally exercised, while wholesale products ___ carry penalties for
repayment or include rights to terminate wholesale contracts on very different terms than are common in retail
products.
- A. Frequently; rarely
- B. Hardly ever; rarely
- C. Frequently; typically
- D. Hardly ever; typically
Answer: C
NEW QUESTION # 160
According to the largest global poll of foreign exchange market participants, which one of the following four
global financial institutions was the most active participant in the global foreign exchange market?
- A. Barclays Capital
- B. Deutsche Bank
- C. Citibank
- D. UBS AG
Answer: B
NEW QUESTION # 161
James Johnson has a $1 million long position in ThetaGroup with a VaR of 0.3 million, and $1 million long
position in VolgaCorp with a VaR of 0.4 million. The returns of the two companies have zero correlation.
What is the portfolio VaR?
- A. $0.5 million
- B. $1 million
- C. $0.4 million
- D. $0.7 million
Answer: A
NEW QUESTION # 162
A bank customer chooses a mortgage with low initial payments and payments that increase over time because
the customer knows that she will have trouble making payments in the early years of the loan. The bank makes
this type of mortgage with the same default assumptions uses for ordinary mortgages, thus underestimating the
risk of default and becoming exposed to:
- A. Banking speculation
- B. Sampling bias
- C. Adverse selection
- D. Moral hazard
Answer: C
NEW QUESTION # 163
Which one of the following four regulatory drivers for operational risk management includes risk and control
requirements for financial statements in the United States?
- A. The Sarbanes-Oxley Act
- B. Solvency II
- C. The Markets in Financial Instruments Directive
- D. Basel II Accord
Answer: A
NEW QUESTION # 164
Which one of the following four statements correctly identifies the Basel II Accord's definition of operational
risk?
- A. Operational risk is a risk arising from execution of a company's business functions.
- B. Operational risk is the risk of loss resulting from inadequate or failed processes, people and systems or
from external events. - C. Operational risk is all the risk that is not captured by market and credit risks.
- D. Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it
attempts to operate within a given field or industry.
Answer: B
NEW QUESTION # 165
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GARP 2016-FRR Exam is divided into two parts, Part I and Part II. Part I of the exam covers the fundamental concepts of financial risk management, including the principles of risk management, quantitative analysis, and financial markets. Part II of the exam focuses on the practical application of risk management techniques in real-world scenarios, including case studies and simulations. 2016-FRR exam is designed to test the knowledge and skills of candidates in the areas of risk management and regulation, and to provide them with the necessary tools to succeed in their careers in finance.
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