2016-FRR Certification Overview - [Oct 28, 2021] Latest 2016-FRR PDF Dumps
The Best GARP 2016-FRR Study Guides and Dumps of 2021
NEW QUESTION 151
Which of the following statements represents a methodological difference between variance-covariance and
full revaluation methods?
- A. Variance-covariance approach uses only historic data to compute the covariance matrix.
- B. Variance-covariance approach prices positions more accurately than the full revaluation approach.
- C. Variance-covariance approach provides computational advantages over the full revaluation approach.
- D. Variance-covariance approach computes the VAR for each position separately, while the full revaluation
method computes the VAR on a portfolio basis.
Answer: C
NEW QUESTION 152
Rising TED spread is typically a sign of increase in what type of risk among large banks?
I. Credit risk
II. Market risk
III. Liquidity risk
IV. Operational risk
- A. II only
- B. I, II, and III
- C. I only
- D. I and IV
Answer: C
NEW QUESTION 153
A bank owns a portfolio of bonds whose composition is shown below.
What is the modified duration of the portfolio?
- A. 0.5
- B. 8.5
- C. 2.30
- D. 1.30
Answer: D
NEW QUESTION 154
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, II, III
- B. I, III
- C. II, III
- D. I
Answer: D
NEW QUESTION 155
Which of the following factors are typically included in standard operational risk definitions?
I. Human errors
II. Process failure
III. Systems failure
IV. Unexpected events
- A. I and II
- B. I, II and III
- C. I and IV
- D. II and III
Answer: B
NEW QUESTION 156
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. III
- B. I and II
- C. I and IV
- D. III and IV
Answer: B
NEW QUESTION 157
To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a
credit portfolio manager should use the following metric:
- A. Credit VaR
- B. Expected loss
- C. Factor sensitivity
- D. Unexpected loss
Answer: B
NEW QUESTION 158
Which one of the following four statements does identify correctly the relationship between the value of an
option and perceived exchange rate volatility?
- A. As the perceived future foreign exchange volatility increases, the value of all options increases.
- B. As the perceived future foreign exchange volatility decreases, the value of all options increases.
- C. Option values can only change due to the factors related to the demand for specific options
- D. With increases in perceived future foreign exchange volatility, the value of all foreign exchange
Answer: A
NEW QUESTION 159
An asset manager for a large mutual fund is considering forward exchange positions traded in a clearinghouse
system and needs to mitigate the risks created as a result of this operation. Which of the following risks will be
created as a result of the forward exchange transaction?
- A. Credit risk
- B. Exchange rate risk
- C. Exchange rate and interest rate risk
- D. Exchange rate and credit risk
Answer: C
NEW QUESTION 160
Which of the following statements about the option gamma is correct? Gamma is the
I. Second derivative of the option value with respect to the volatility.
II. Percentage change in option value per percentage change in the price of the underlying instrument.
III. Second derivative of the value function with respect to the price of the underlying instrument.
IV. Rate of change of the option delta with respect to changes in the underlying price.
- A. I only
- B. II, III, and IV
- C. II and III
- D. III and IV
Answer: D
NEW QUESTION 161
Using a forward transaction, Omega Bank buys 100 metric tones of aluminum for delivery in six-months' time.
However, after two months, the bank becomes concerned with the potential fluctuations in aluminum prices
and wants to hedge its potential exposure against a possible decline in aluminum prices. Which one of the
following four strategies could the bank use to offset the risk from its current exposure to aluminum as it sets
the price for selling the commodity in four-months' time?
- A. Buy an aluminum futures contract
- B. Sell an aluminum forward contract
- C. Buy an aluminum forward contract
- D. Sell an aluminum futures contract
Answer: D
NEW QUESTION 162
A risk manager is analyzing a call option on the GBP with a vega of 0.02. When the perceived future volatility
increases by 1%, the call option
- A. Increases in value by 0.02.
- B. Decreases in value by 2.
- C. Decreases in value by 0.02.
- D. Increases in value by 2.
Answer: A
NEW QUESTION 163
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. II, III
- B. I, II, III, IV
- C. III, IV
- D. I, II
Answer: B
NEW QUESTION 164
To hedge equity exposure without buying or selling shares of stock or otherwise rebalancing the portfolio, a
risk manager could initiate
- A. A long total return swap position.
- B. A short total return swap position.
- C. A long debt-for-equity swap.
- D. A short debt-for-equity swap.
Answer: B
NEW QUESTION 165
Which one of the following market risk measures evaluates the bank's earnings sensitivity?
- A. Value-at-risk back testing
- B. Large exposure risk identification
- C. Cash flow stress testing
- D. Earnings-at-risk stress testing
Answer: D
NEW QUESTION 166
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