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Obtaining the GARP 2016-FRR Certification can help professionals advance their careers and increase their earning potential. Employers often seek candidates who hold this certification because it demonstrates a high level of knowledge and expertise regarding financial risk and regulation. Additionally, the certification can help individuals stand out in a competitive job market and can provide a certain level of prestige and recognition within the industry. Overall, the GARP 2016-FRR Certification is a valuable credential for anyone working in the field of financial risk and regulation.
Preparing for the FRR exams requires a significant amount of time and effort. GARP provides study materials and resources, including textbooks, online courses, and practice exams. Many candidates also choose to enroll in a review course, which can help them better understand the material and prepare for the exam. It is important to note that the FRR exams are challenging, and candidates should be prepared to dedicate significant time and effort to studying.
NEW QUESTION # 69
Operational risk team for a large international bank is implementing business continuity planning (BCP).
Which of the following BCP activities fall within the definition of operational risk and represent Basel II
Accord's operational risk categories:
I. Damage to Physical Assets
II. Business Disruption and System Failures
III. Social Distancing Requirements
IV. Potential for Extreme Losses
- A. I and II
- B. III
- C. III and IV
- D. I and IV
Answer: A
NEW QUESTION # 70
Changes to which one of the following four factors would typically not increase the cost of credit?
- A. Increase in consumption of goods and services.
- B. Increasing inflation rates in a country.
- C. Higher risk premium on a fixed income instrument.
- D. Higher return earned on alternative investments.
Answer: C
NEW QUESTION # 71
To estimate a partial change in option price, a risk manager will use the following formula:
- A. Partial change in option price = Delta x Change in underlying price
- B. Partial change in option price = Delta x Gamma x Change in underlying price
- C. Partial change in option price = Delta x Gamma x (1+ Change in underlying price)
- D. Partial change in option price = Delta x (1+ Change in underlying price)
Answer: A
NEW QUESTION # 72
The market risk manager of SigmaBank is concerned with the value of the assets in the bank's trading book.
Which one of the four following positions would most likely be not included in that book?
- A. $10,000,000 loan to IBM worth $9,800,000.
- B. 10,000 shares of IBM worth $10,000,000.
- C. 300,000 options on IBM shares worth $10,000,000.
- D. $10,000,000 bond issued by IBM worth $11,000,000.
Answer: A
NEW QUESTION # 73
Which one of the following four examples would not be considered a typical source of market risk?
- A. The JPY depreciating against the USD.
- B. Changes in the oil price due to the discovery of new oil fields.
- C. Increased default rate on commercial mortgages due to higher interest rates.
- D. Unexpected changes in the term structure of interest rates.
Answer: C
NEW QUESTION # 74
Mega Bank has $100 million in deposits on which it pays 3% interest, and $20 million in equity on which it
pays no interest. The loan portfolio of $120 million earns an average rate of 10%. If the rates remain the same,
what is the net interest income of Mega Bank?
- A. $2 million per year
- B. $5 million per year
- C. $12 million per year
- D. $9 million per year
Answer: D
NEW QUESTION # 75
The operational risk policy should include:
I. The firm's definition of risk
II. The governance of operational risk including who owns it, what it owns, and how issues should be
escalated
III. The main activities and elements that are managed by the operational risk function
- A. I, II, III
- B. II, III
- C. I, II
- D. I, III
Answer: A
NEW QUESTION # 76
Which of the following attributes of duration gap model typically cause criticism?
I. Basis risk
II. Errors in the linear model
III. Costs of immunization
IV. Constant nature of calculation
- A. I, III, IV
- B. I, II, III
- C. II, III, IV
- D. I, II
Answer: B
NEW QUESTION # 77
On January 1, 2010 the TED (treasury-euro dollar) spread was 0.9%, and on January 31, 2010 the TED spread
is 0.4%. As a risk manager, how would you interpret this change?
- A. Increase in interest rates on both interbank loans and T-bills.
- B. The decrease in the TED spread indicates a decrease in credit risk on interbank loans.
- C. The decrease in the TED spread indicates an increase in credit risk on interbank loans.
- D. Increase in credit risk on T-bills.
Answer: B
NEW QUESTION # 78
An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.
- A. Negative; dropping
- B. Positive; dropping
- C. Positive; rising
- D. Negative; rising
Answer: C
NEW QUESTION # 79
Which one of the following four alternatives lists the three most widely traded currencies on the global foreign
exchange market, as of April 2007, in the decreasing order of market share? EUR is the abbreviation of the
European euro, JPY is for the Japanese yen, and USD is for the United States dollar, respectively.
- A. JPY, EUR, USD
- B. USD, JPY, EUR
- C. USD, EUR, JPY
- D. EUR, USD, JPY
Answer: C
NEW QUESTION # 80
Which one of the following four global markets for financial assets or instruments is widely believed to be the
most liquid?
- A. Fixed income market
- B. Equity market.
- C. Commodities market
- D. Foreign exchange market.
Answer: D
NEW QUESTION # 81
Financial regulators in a European country are considering banning trading in highly complex derivative
instruments that are not settled through a centralized clearinghouse. This ban can result in:
I. The value of the country's currency dropping
II. Counterparties involved in trading of these derivative instruments failing to fulfill their obligations
III. The business model relying on these instruments failing
IV. Certain activities becoming illegal
- A. II, III, IV
- B. II, III
- C. I, IV
- D. I, II
Answer: A
NEW QUESTION # 82
Jack Richardson wants to compute the 1-month VaR of a portfolio with a market value of USD 10 million,
with an average monthly return of 1% and average monthly standard deviation of 1.5%. What is the portfolio
VaR at 99% confidence level?
Probability Cumulative Normal distribution
0.90 1.282
0.91 1.341
0.92 1.405
0.93 1.476
0.94 1.555
0.95 1.645
0.96 1.751
0.97 1.881
0.98 2.054
0.99 2.326
- A. 164,500
- B. 232,600
- C. 246,750
- D. 348,900
Answer: D
NEW QUESTION # 83
In analyzing the historical performance of a financial product, you are concerned about "fat tails", the
probability of extreme returns compared to realized returns. Which of the following measures should you use
to determine if the product return distribution of the product has "fat tails"?
- A. Mean
- B. Kurtosis
- C. Standard deviation
- D. Skewness
Answer: B
NEW QUESTION # 84
Which one of the following four physical commodities markets has the right combination of characteristics
that generally allows short selling in the market, without making the short-selling transaction prohibitively
expensive?
- A. Natural Gas
- B. Grain
- C. Oil
- D. Gold
Answer: D
NEW QUESTION # 85
Which one of the following four statements represents the advantages of the historical sim-ulation method
when calculating VaR?
- A. Rely on current market data to describe the distribution of returns and determine volatilities.
- B. Solve the problem caused by incorrectly assuming that asset returns are normally distributed.
- C. Are believed to be superior in accuracy predicting future levels of realized volatility.
- D. Are only using loss probabilities that can be found in tables of the standard normal distribution.
Answer: B
NEW QUESTION # 86
Which one of the following statements about futures contracts is correct?
I. Futures contracts are subject to the same risks as the underlying instruments.
II. Futures contracts have additional interest rate risk die to the future delivery date.
III. Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.
- A. I
- B. II, III
- C. I, II, III
- D. I, III
Answer: A
NEW QUESTION # 87
Which one of the four following statements about a minimal loss threshold in operational loss data collection
is incorrect?
- A. The operational loss data collection program has to capture all losses regardless of their size.
- B. Setting an operational loss data collection threshold depends on the risk appetite of the firm and
regulatory requirements it needs to meet. - C. A company can have differing operational loss data collection and reporting thresholds for different
departments. - D. The operational loss data collection program must include all material losses that are above minimal
gross loss threshold.
Answer: A
NEW QUESTION # 88
An options trader for a large institutional investor takes a long equity option position. Which of the following
risks need to be considered when taking this position?
I. All the risks of underlying equities
II. Perceived volatility changes
III. Future dividends yields
IV. Risk-free interest rates
- A. I, II, III, IV
- B. III, IV
- C. II, III
- D. I, II
Answer: A
NEW QUESTION # 89
Which of the following about the ratios between various Tiers of capital is not a requirement of the Basel
Committee?
- A. Innovative instruments in Tier 1 are limited to a maximum of 15% of Tier 1 capital.
- B. Lower Tier 2 capital may only equal 50% of core capital.
- C. Upper Tier 2 capital may only equal 30% of core capital.
- D. Tier 2 capital cannot exceed 50% of the bank's total regulatory capital.
Answer: A
NEW QUESTION # 90
Which one of the following changes would typically increase the price of a fixed income instrument, such as a
bond?
- A. Increase in risk premium.
- B. Increase in time to maturity.
- C. Decrease in inflation rates in a country.
- D. Increase in demand for goods and services.
Answer: C
NEW QUESTION # 91
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GARP 2016-FRR exam is recognized globally as a mark of excellence in risk management and regulation. Professionals who pass 2016-FRR exam are in high demand in the financial industry, and are often sought after by top-tier companies and institutions. Financial Risk and Regulation (FRR) Series certification provides a competitive advantage in a constantly evolving field and opens up new opportunities for career growth and advancement.
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