Updated Free GARP 2016-FRR Test Engine Questions with 390 Q&As [Q57-Q73]

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Updated Free GARP 2016-FRR Test Engine Questions with 390 Q&As

The Best Financial Risk and Regulation 2016-FRR Professional Exam Questions

The FRR Series certification is highly respected in the financial industry, and is a valuable asset for professionals who want to advance their careers in risk management. 2016-FRR exam covers a wide range of topics, including market risk, credit risk, operational risk, liquidity risk, and regulatory compliance. It also covers the latest regulatory requirements, such as Basel III, Solvency II, and Dodd-Frank. The FRR Series certification is recognized by leading financial institutions around the world, including banks, insurance companies, and asset managers.

QUESTION 57
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. If these CDOs can be used in a repo transaction at a 20% haircut, what is the maximum leverage factor for a transaction with the CDOs?

0.8

1.5

QUESTION 58
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

I, II

II, III

III, IV

I, II, III, IV

QUESTION 59
Which of the following statements about implementation of a successful RCSA program is correct?

An RCSA is only complete after all possible mitigating actions have been identified and analyzed as a result of the assessment process.

Internal loss data help to identify the risks and control weaknesses that need to be addressed in the RCSA; external events are not helpful in informing the discussions around potential risks.

The RCSA scoring methodology should include only financial impacts and not include reputational, legal, regulatory, client and life safety impacts.

To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and support functions prior to the launching the RCSA.

QUESTION 60
Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew.
How much money should the bank plan to raise so as to avoid a liquidity problem?

$710 million

$712 million

$700 million

$650 million

QUESTION 61
Which one of the following four statements about the “market-maker” trading strategy is INCORRECT?

A market maker that attracts buy and sell orders can make a profit from the spread quoted between the buy and sell price.

A market maker can benefit from the market information she gets from the trades she is asked to execute.

This strategy is independent of market liquidity and number of other market makers.

This risk in this strategy is that traders have to take positions that may quickly incur a loss.

QUESTION 62
Which of the following correctly identifies reasons for collecting internal operational risk event and loss information?
I. Assessing the risk of specific areas of concern.
II. Evaluating risk events and outcomes.
III. Collecting data for capital modeling.
IV. Getting insight into risk events in other firms in the industry.

I and II

II and III

I, II and III

II, III, and IV

QUESTION 63
Which one of the following four statements correctly defines a typical carry trade?

A bank borrows funds in a high-interest currency and places the funds in a long-term low volatility investment vehicle.

A bank borrows funds in a high-interest currency and invests the funds into high-yield emerging market debt.

A bank borrows funds in a low-interest currency and places the funds on deposit in a high-interest currency.

A bank borrows funds in a low-interest currency, accumulates reserves, and lends in another low-interest currency.

QUESTION 64
John owns a bond portfolio worth $2 million with duration of 10. What positions must he take to hedge this portfolio against a small parallel shifts in the term structure.

Long position worth $2 million with duration of 10.

Long position worth $20 million with duration of 1.

Short position worth $2 million with duration of 10.

Short position worth $20 million with duration of 1.

QUESTION 65
When creating a model to estimate risk, it is important to recognize which one of the following?

Models assume that tomorrow’s market will be better than today’s

Models assume that tomorrow’s market will be worse than today’s

Models that use historical data as an input can only estimate possible future market behavior

Models that use historical data as an input predict future market behavior accurately

QUESTION 66
Of all the risk factors in loan pricing, which one of the following four choices is likely to be the least significant?

Probability of default

Duration of default

Loss given default

Exposure at default

QUESTION 67
Which one of the following activities is carried out by the back office?

Risk management

Confirmations

Trading

Marketing

QUESTION 68
The technique of using interest rate swap positions to reduce the effect of the variability of interest rates on net interest income is known as:

Inoculation

Vaccination

Immunization

Insulation

QUESTION 69
Suppose that a regulator deems all corporate debt to have the same risk level. Which of the following behavior
of banks would be an example of regulatory arbitrage?

Banks increase their exposure to corporate debt.

Banks decrease their exposure to corporate debt.

Banks shift their exposure to more risky corporate debt.

Banks shift their exposure to less risky corporate debt.

QUESTION 70
Floating rate bonds typically have ________ duration which means they have ________ sensitivity to interest
rate changes.

long, small

long, high

short, high

short, small

QUESTION 71
Which one of the following four statements about economic capital of a bank is correct?

Economic capital measures how the economy is doing compared to the bank.

Economic capital reflects the possible losses that could occur based on the bank’s own estimates of the risks it is taking.

Economic capital is determined by rules imposed by an external authority.

Economic capital is the present value of the earnings generated by the bank in the future.

QUESTION 72
Most loans and deposits in the interbank market have a maturity of:

More than 10 years

More than 5 years but less than 10 years

More than 3 years but less than 5 years

Less than one year

QUESTION 73
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

Increases in value by 0.02.

Increases in value by 2.

Decreases in value by 0.02.

Decreases in value by 2.