2023 Updates For the Latest 2016-FRR Free Exam Study Guide!
Best 2016-FRR Exam Preparation Material with New Dumps Questions
The Global Association of Risk Professionals (GARP) offers an exam series known as the Financial Risk and Regulation (FRR) Series. The FRR Series is designed for professionals looking to enhance their knowledge in financial risk management and regulatory compliance. 2016-FRR exam series covers topics such as financial risk management, credit risk, market risk, operational risk, and regulatory compliance.
NEW QUESTION # 173
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.
- A. I and II
- B. II, III, and IV
- C. I, II and III
- D. II and III
Answer: C
NEW QUESTION # 174
Which one of the following four statements on factors affecting the value of options is correct?
- A. As time passes, options will increase in value.
- B. As the value of underlying security increases, the value of the put option increases.
- C. As interest rates rise and option's rho is positive, option prices will decrease.
- D. As volatility rises, options increase in value.
Answer: D
NEW QUESTION # 175
To ensure good risk management which of the following should be true about the CRO role and function?
- A. The CRO should receive compensation that is directly determined by the profit of the trading desk.
- B. To ensure efficient flow of information the CRO should not be independent of business units.
- C. The CRO should not be involved with the setting of risk limits.
- D. The CRO should report to the CEO or the Board of Directors.
Answer: D
NEW QUESTION # 176
Which one of the following four statements best describes challenges of delta-normal method of mapping
options positions?
Delta-normal method understates
- A. Risks of long option positions for puts and overstates risks of short option positions for calls.
- B. Risks of short option positions and overstates risks of long option positions for both calls and puts.
- C. Risks of long option positions for calls and overstates risks of short option positions for puts.
- D. Risks of long and short positions for both calls and puts.
Answer: B
NEW QUESTION # 177
To hedge a foreign exchange exposure on behalf of a client, a small regional bank seeks to enter into an
offsetting foreign exchange transaction. It cannot access the large and liquid interbank market open primarily
to larger banks. At which one of the following exchanges can the smaller bank trade the currency futures
contracts?
I. The Tokyo Futures Exchange
II. The Euronext-Liffe Exchange
III. The Chicago Mercantile Exchange
- A. II, III
- B. I
- C. III
- D. I, II, III
Answer: D
NEW QUESTION # 178
Floating rate bonds typically have ________ duration which means they have ________ sensitivity to interest
rate changes.
- A. long, high
- B. short, high
- C. short, small
- D. long, small
Answer: C
NEW QUESTION # 179
Typically, which one of the following four option risk measures will be used to determine the number of
options to use to hedge the underlying position?
- A. Delta
- B. Vega
- C. Rho
- D. Theta
Answer: A
NEW QUESTION # 180
Since most consumers of natural gas do not have the ability to store it, they contract with gas suppliers to
receive a flow of natural gas equal to a specific number of MMBT's per day (MMBT is millions of British
Termal Units, the unit in which gas futures are quoted on the U.S. markets). To protect against price increases
with a bank, the natural gas consumer, concerned with the average price over the course of the month, will use
the following contracts:
- A. American options
- B. Flexible volume options
- C. Compound options
- D. Asian options
Answer: D
NEW QUESTION # 181
A risk analyst is considering how to reduce the bank's exposure to rising interest rates. Which of the following
strategies will help her achieve this objective?
I. Reducing the average repricing time of its loans
II. Increasing the average repricing time of its deposits
III. Entering into interest rate swaps
IV. Improving earnings capacity and increasing intermediated funds
- A. I, II, IV
- B. IV
- C. III
- D. I, II
Answer: A
NEW QUESTION # 182
Which of the following are typical properties of a statistical distribution of potential losses that a bank might
sustain over a period of time?
I. The range of possible losses above the average loss is much greater than those below the average loss.
II. The loss that is most likely to occur is below the average loss.
III. The loss that is most likely to occur is above the average loss.
- A. I, III
- B. III
- C. II
- D. I, II
Answer: C
NEW QUESTION # 183
Banks duration match their assets and liabilities to manage their interest risk in their banking book. A bank has
$100 million in interest rate sensitive assets and $100 million in interest rate sensitive liabilities. Currently the
bank's assets have a duration of 5 and its liabilities have a duration of 2. The asset-liability management
committee of the bank is in the process of duration-matching. Which of the following actions would best
match the durations?
- A. Increase the duration of liabilities by 2 and increase the duration of assets by 1.
- B. Decrease the duration of liabilities by 1 and decrease the duration of assets by 1.
- C. Decrease the duration of liabilities by 1 and increase the duration of assets by 1.
- D. Increase the duration of liabilities by 2 and decrease the duration of assets by 1.
Answer: D
NEW QUESTION # 184
When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are
increasing as the stigma of default evaporates, and more borrowers default. This phenomenon constitutes
- A. Adverse selection
- B. Speculative bias
- C. Moral hazard
- D. Herd behavior
Answer: D
NEW QUESTION # 185
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. I, II
- C. II, III
- D. I, II, III
Answer: B
NEW QUESTION # 186
Which one of the following four statements regarding commodity derivative risks is INCORRECT?
- A. In most commodities, the longest term contracts are the most volatile, while the shortest term forward
contract are the least volatile. - B. Calendar spreads represent a special case of basis risk and occur when the relative prices of commodity
futures do not come in alignment and the trader becomes exposed to the absolute price movements. - C. Because of the different demand/supply balance in each region and the cost of transporting the oil
between regions, a tanker of Brent crude oil in the UK will have a different value to a UK buyer than a
tanker of Arab light crude oil in Singapore, which results in the basis risk. - D. Some commodities can be both in backwardation and a have a strong seasonal element.
Answer: A
NEW QUESTION # 187
Which one of the following statements accurately describes market risk tolerance?
- A. Market risk tolerance is the maximum loss the bank is willing to bear due to fluctuations in market
prices and rates. - B. Market risk tolerance is the maximum loss in the market value of financial instruments caused by the
failure of the counterparty to meet its obligations. - C. Market risk tolerance is the maximum likely gain in the market value of portfolios over a given period
of time. - D. Market risk tolerance is the minimum loss the bank is willing to bear due to fluctuations in market prices
and rates.
Answer: A
NEW QUESTION # 188
Which one of the following four factors typically drives the pricing of wholesale products?
- A. Long-term competitiveness
- B. Prevailing market price
- C. Overall risk exposure
- D. Marketing considerations
Answer: B
NEW QUESTION # 189
Which of the following statements depicts a difference between funding liquidity risks and trading liquidity
risks?
- A. Funding liquidity risks are associated only with the bank assets while trading liquidity risks are
associated with both assets and liabilities of the bank. - B. Funding liquidity risks are associated with how fast prices move in the market while trading liquidity
risks originate out of bank trades. - C. Funding liquidity risks are short term risks while trading liquidity risks are longer term risks.
- D. Funding liquidity risks are concerned with the ability of the bank to fund deposits withdrawals while
trading liquidity risks are concerned with the change in bid-offer spreads of asset values.
Answer: D
NEW QUESTION # 190
By foreign exchange market convention, spot foreign exchange transactions are to be exchanged at the spot
date based on the following settlement rule:
- A. One-day rule
- B. Four-day rule
- C. Three-day rule
- D. Two-day rule
Answer: D
NEW QUESTION # 191
Which of the following statements about implementation of a successful RCSA program is correct?
- A. To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and
support functions prior to the launching the RCSA. - B. An RCSA is only complete after all possible mitigating actions have been identified and analyzed as a
result of the assessment process. - C. 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. - D. The RCSA scoring methodology should include only financial impacts and not include reputational,
legal, regulatory, client and life safety impacts.
Answer: A
NEW QUESTION # 192
BetaFin has decided to use the hybrid RCSA approach because it believes that it fits its operational
framework. Which of the following could be reasons to use the hybrid RCSA method?
I. BetaFin has previously created series of RCSA workshops, and the results of these workshops can be used to
design the questionnaires.
II. BetaFin believes that using the questionnaire approach should be more useful.
III. BetaFin had used the questionnaire approach successfully for certain businesses and the workshop
approach for others.
IV. BetaFin had already implemented a sophisticated RCSA IT-system.
- A. I and II
- B. III and IV
- C. I and III
- D. II, III, and IV
Answer: C
NEW QUESTION # 193
Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:
- A. The percentage change in bond price when the yields change by 1%.
- B. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- C. The percentage change in bond price when yields change by 1 basis point.
- D. The change in value of a bond when yields increase by 0.01%.
Answer: D
NEW QUESTION # 194
SigmaBank has many branches that offer the same products and services. Which one of the four following
statement presents an advantage of using RCSA questionnaire approach in the SigmaBank's operational risk
framework?
- A. The results can be collected electronically and the responses compared to identify themes, trends and
areas of potential control weakness or elevated risk. - B. It provides a forum for an in-depth discussion of the operational risks in the firm.
- C. This approach ensures that there has been full participation in the scoring, rather than a single view.
- D. The questionnaires are usually sent to specific nominated parties for completion.
Answer: A
NEW QUESTION # 195
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, III
- B. II, III
- C. I, II, III
- D. I, II
Answer: C
NEW QUESTION # 196
Modified duration of a bond measures:
- A. The percentage change in a bond price when yields increase by 1 basis point.
- B. The percentage change in a bond price when the yields change by 1%.
- C. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- D. The change in value of a bond when yields increase by 1 basis point.
Answer: B
NEW QUESTION # 197
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GARP 2016-FRR exam is one of the most important exams in the FRR Series. 2016-FRR exam covers a wide range of topics related to financial risk and regulation, including risk management, financial markets and institutions, and regulatory compliance. 2016-FRR exam is designed to test the candidate's understanding of these topics and their ability to apply this knowledge in real-world scenarios.
The Global Association of Risk Professionals (GARP) is a non-profit organization that focuses on the education and advancement of risk management professionals. One of GARP's primary initiatives is the creation of certification programs that validate individuals' knowledge and expertise in various aspects of risk management. The Financial Risk and Regulation (FRR) Series is one such certification program that focuses on financial risk management and regulatory compliance.
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