[Mar 22, 2024] 2016-FRR PDF Questions and Testing Engine With 345 Questions
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GARP 2016-FRR Certification Exam covers a wide range of topics related to financial risk and regulation, including market risk, credit risk, operational risk, and liquidity risk. 2016-FRR exam also covers key regulatory frameworks such as Basel III and Solvency II, as well as other important regulations such as the Dodd-Frank Act and the European Market Infrastructure Regulation (EMIR). 2016-FRR exam is designed to test the knowledge and skills of professionals who work in risk management, compliance, and regulatory roles.
Preparing for the GARP 2016-FRR Certification Exam requires a significant amount of time and effort. Candidates must have a strong understanding of financial risk management principles and practices and must be able to apply that knowledge to real-world scenarios. They must also be familiar with the regulatory landscape and understand the requirements and expectations of regulators. With the right preparation and dedication, however, candidates can successfully earn the GARP 2016-FRR Certification and take their careers in risk management to the next level.
NEW QUESTION # 128
What does correlation between two variables measure?
- A. Extreme returns of both variables.
- B. The proportion of variability in one of the variables that is explained by the other.
- C. Symmetry of a joint distribution of the two variables.
- D. Association between the two variables and the strength of a possible statistical relationship.
Answer: D
NEW QUESTION # 129
What is the role of market risk management function within a bank?
I. Control and minimize the risks the bank should take.
II. Establish a comprehensive market risk policy framework.
III. Define, approve and monitor risk limits.
IV. Perform stress tests and other qualitative risk assessments.
- A. I and III
- B. II, III, and IV
- C. I, II and III
- D. II and IV
Answer: B
NEW QUESTION # 130
Which one of the following four statements represents the advantages of the historical sim-ulation method
when calculating VaR?
- A. Are only using loss probabilities that can be found in tables of the standard normal distribution.
- B. Are believed to be superior in accuracy predicting future levels of realized volatility.
- C. Solve the problem caused by incorrectly assuming that asset returns are normally distributed.
- D. Rely on current market data to describe the distribution of returns and determine volatilities.
Answer: C
NEW QUESTION # 131
According to a Moody's study, the most important drivers of the loss given default historically have been all of
the following EXCEPT:
I. Debt type and seniority
II. Macroeconomic environment
III. Obligor asset type
IV. Recourse
- A. I
- B. III, IV
- C. II
- D. I, II
Answer: B
NEW QUESTION # 132
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is
collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at
50%. In this case, what will the bank's expected loss be?
- A. $750
- B. $500
- C. $1,300
- D. $1,000
Answer: B
NEW QUESTION # 133
Which one of the following four statements correctly identifies disadvantages of using the economic capital?
- A. Economic capital may do not take into consideration the regulatory requirements.
- B. Since banks are putting their money at risk they have an incentive to increase economic capital.
- C. Economic capital estimates the level of expected losses.
- D. The economic capital models used by banks may be subject to significant model risk.
Answer: D
NEW QUESTION # 134
Company A needs to provide a risk probability/frequency score for its RCSA program. If the event is likely to
happen once in 2 years, then the frequency score will be equal to:
- A. 0.2
- B. 0
- C. 0.5
- D. 1
Answer: C
NEW QUESTION # 135
Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a
foreign exchange option?
- A. Underlying interest rates
- B. Discrete future stock prices
- C. Option exercise price
- D. Underlying exchange rates
Answer: B
NEW QUESTION # 136
A bank considers issuing new capital to increase its Tier 1 capital levels. Which of the following financial
instruments would most likely to be considered?
- A. Short-term callable debt
- B. Short-term debt convertible to non-cumulative preferred shares
- C. Convertible preferred shares
- D. Long-term and callable debt convertible to equity
Answer: C
NEW QUESTION # 137
A bank has a large number of auto loans and would prefer to sell them to raise cash for more funding.
However, selling individual auto loans is difficult. What could the bank do?
- A. Obtain a stronger credit rating so that the bank could borrow at a cheaper rate.
- B. Set up a marketing team to sell individual loans to investors.
- C. Package the loans into a securitized vehicle and sell the low risk portion of the portfolio.
- D. Merge with another bank.
Answer: C
NEW QUESTION # 138
Which one of the following four statements on the seniority of corporate bonds is incorrect?
- A. In bankruptcy, holders of senior bonds are paid in full before any holders of subordinated bonds receive
payment. - B. Seniority refers to the priority of a bond in bankruptcy.
- C. Senior bonds typically have lower credit spreads than junior bonds with the same maturity and payment
characteristics. - D. Junior bonds always pay higher coupons than subordinated bonds.
Answer: D
NEW QUESTION # 139
The main building blocks of an operational risk framework include all of the following options EXCEPT:
- A. Scenario analysis
- B. Risk and control self-assessment
- C. Loss data collection
- D. Compliance document preparation
Answer: D
NEW QUESTION # 140
Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD
10 million at the same confidence level. Which bank is in a more risky position as measured by VaR?
- A. Bank G is taking twice the risk of bank H as measured by VaR.
- B. Bank H is taking twice the risk of bank G as measured by VaR.
- C. Since the confidence levels are the same we cannot make any conclusions.
- D. Both banks are equally risky since the measurements are with the same confidence level.
Answer: A
NEW QUESTION # 141
Which of the following statements defines Value-at-risk (VaR)?
- A. VaR is the worst possible loss on a financial instrument or a portfolio of financial instruments over a
given time period. - B. VaR is the minimum likely loss on a financial instrument or a portfolio of financial instruments with a
given degree of probabilistic confidence. - C. VaR is the maximum of past losses over a given period of time.
- D. VaR is the maximum likely loss on a financial instrument or a portfolio of financial instruments over a
given time period with a given degree of probabilistic confidence.
Answer: D
NEW QUESTION # 142
Which of the following statements regarding collateralized debt obligations (CDOs) is correct?
I. CDOs typically have loans or bonds as underlying collateral.
II. CDOs generally less risky than CMOs.
III. There is a correlation among defaults in the CDO collateral which should be considered in valuation of
these complex instruments.
- A. II and III
- B. I only
- C. I, II, and III
- D. I and III
Answer: D
NEW QUESTION # 143
Which of the following attributes are typical for early models of statistical credit analysis?
- A. These models assumed the default of any obligor was independent of the default of any other.
- B. These models effectively incorporated herd behavior.
- C. The underlying default assumptions were analytically inconvenient.
- D. The underlying default assumptions failed to develop relatively simple formulas for the determination of
portfolio credit risk.
Answer: A
NEW QUESTION # 144
In the United States, foreign exchange derivative transactions typically occur between
- A. Thrifts and large commercial banks, where the risks become isolated.
- B. Regional banks with international operations, where the risks depend on the specific derivative
transactions. - C. All banks with international branches, where the risks become widely distributed based on trading
exposures. - D. A few large internationally active banks, where the risks become concentrated.
Answer: D
NEW QUESTION # 145
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. Six months after Alpha Bank provides USD
$1 million loan to the Delta Industrial Machinery Corporation, a new competitor enters the machinery
industry, causing Delta to adjust its prices and mark down the value of its inventory. Hence, the probability of
default increases from 2% to 10% and the loss given default increases from 50% to 75%. If Alpha Bank can
reprice the loan, what should the new rate be?
- A. 20.5%
- B. 13%
- C. 10%
- D. 16.5%
Answer: A
NEW QUESTION # 146
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GARP 2016-FRR (Financial Risk and Regulation) Certification Exam is a professional certification exam offered by the Global Association of Risk Professionals (GARP). Financial Risk and Regulation (FRR) Series certification is designed for risk management professionals who want to validate their knowledge and skills in financial risk management and regulation. 2016-FRR exam covers a wide range of topics, including financial risk management, regulatory compliance, market risk, credit risk, operational risk, and quantitative analysis.
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