[Dec 21, 2024] New 2016-FRR Exam Dumps with High Passing Rate
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The Global Association of Risk Professionals (GARP) is a not-for-profit organization that aims to promote education and development in the field of risk management. One of its flagship programs is the Financial Risk and Regulation (FRR) Series Certification Exam. Financial Risk and Regulation (FRR) Series certification is designed to validate the knowledge and skills of risk professionals who work in the financial services industry. The FRR Series Exam covers a wide range of topics related to financial risk management, including credit risk, market risk, operational risk, and regulatory compliance.
You should also be aware of the following information about the 2016-FRR
To maintain the GARP 2016-FRR Certification, you are required to have continuous learning. If you are not able to study for this certification every year, you will lose the certificate. You can maintain your certification status by taking advantage of various alternative paths to the examination. Self-study is one of these routes. You will need to study hard in order to clear it because it has a high passing score. But if you are unable to take it every year, you should consider taking self-study courses instead. This will allow you to keep your skills sharp without the stress of having to take an examination that is very difficult and can be overwhelming for some people. Copyright law protects the contents of our GARP 2016-FRR exam dumps to ensure that they are always updated. If you are interested in getting your certification to work for you, do not hesitate to contact us.
If you fail the GARP-FRR, you will have to wait until the next examination window opens. The next window generally starts within three months of the previous one ending. In order to pass the next examination, you should follow a successful study plan that includes self-study resources and live training courses. It is recommended by 2016-FRR practice exams that you schedule multiple dates because there is a high possibility that you will not be able to take any of them. If there are too many changes in your schedule, you will not be ready to take 2016-FRR on your scheduled dates. It is necessary that you give yourself enough time to prepare for this successfully.
Advantages of the GARP 2016-FRR
There are numerous advantages of the GARP 2016-FRR Certification.
- The importance of the GARP 2016-FRR Certification cannot be denied. Successfully achieving it will give you the confidence that your knowledge and performance are the best they can be.
- If you are not able to survive the examination on your first try, you can simply schedule another date. But by doing this, you will still be able to access all of your study materials for up to 12 months after your first attempt. Machine learning and Sono mock tests are available online for this 2016-FRR. You can download them and make your preparation easier.
- It will also enable you to easily secure business with firms in overseas markets. 2016-FRR exam dumps have gathered the results of the GARP 2016-FRR question and answer, so candidates can get certified more quickly.
- It has low failure rates, which is another advantage of it. This means that even if you are taking it for the first time, or you are not very familiar with most or all of its arguments, you have a relatively high chance of passing it.
- As a certified professional, you will be able to apply for jobs or promotions within companies across borders.
NEW QUESTION # 206
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.
- A. Long position worth $2 million with duration of 10.
- B. Short position worth $20 million with duration of 1.
- C. Short position worth $2 million with duration of 10.
- D. Long position worth $20 million with duration of 1.
Answer: C
NEW QUESTION # 207
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. Increase in credit risk on T-bills.
- D. The decrease in the TED spread indicates an increase in credit risk on interbank loans.
Answer: B
NEW QUESTION # 208
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. Hence, the loss rate in this case will be
- A. 10%
- B. 3%
- C. 1%
- D. 5%
Answer: C
NEW QUESTION # 209
Which of the following factors would typically increase the credit spread?
I. Increase in the probability of default of the issuer.
II. Decrease in risk premium.
III. Decrease in loss given default of the issuer.
IV. Increase in expected loss.
- A. I and IV
- B. I, II, and IV
- C. I
- D. II and III
Answer: A
Explanation:
The credit spread reflects the additional yield over the risk-free rate that investors demand to compensate for the risk of default. An increase in the probability of default of the issuer (I) would directly increase the credit spread as investors require more return for higher risk. Similarly, an increase in expected loss (IV) would increase the credit spread since the potential loss in the event of default is greater. On the other hand, a decrease in risk premium (II) or a decrease in loss given default (III) would typically lower the credit spread, not increase it.
NEW QUESTION # 210
How could a bank's hedging activities with futures contracts expose it to liquidity risk?
- A. Since futures require margins which are settled every day, the bank could find itself scrambling for
funds. - B. The bank could get exposed to liquidity risk since futures trade on an exchange.
- C. Prices may move such that a loss results on the hedge.
- D. The futures hedge may not work due to the widening of basis which could result in a loss for the bank.
Answer: A
NEW QUESTION # 211
Short-selling is typically associated with the following risks:
I. Potential for extreme losses
II. Risk associated with the availability of shares to borrow
III. Market behavior risk
IV. Liquidity risk
- A. I, II
- B. I, III
- C. I, II, III, IV
- D. II, IV
Answer: C
Explanation:
Short-selling is associated with several risks:
* Potential for extreme losses: If the price of the shorted asset increases significantly, the losses can be unlimited.
* Risk associated with the availability of shares to borrow: Short-sellers need to borrow shares to sell them, and there may be situations where shares are not available.
* Market behavior risk: Market conditions can change rapidly, affecting the prices of shorted assets.
* Liquidity risk: Short-sellers may face difficulty in covering their positions if the market lacks sufficient liquidity.
NEW QUESTION # 212
According to the principles of the Basel II Accord, the implementation and relative weights of the elements of the operational risk framework depend on:
I. The culture of the financial institution
II. Regulatory drivers
III. Business drivers
IV. The bank's reporting currency
- A. I, II, III
- B. I, IV
- C. II, III
- D. II, IV
Answer: A
Explanation:
According to the principles of the Basel II Accord, the implementation and relative weights of the elements of the operational risk framework depend on the culture of the financial institution (I), regulatory drivers (II), and business drivers (III). The bank's reporting currency (IV) is not relevant to the implementation of the operational risk framework under Basel II.References:Basel II Accord principles on operational risk.
NEW QUESTION # 213
What do option deltas measure?
- A. The rate of change of the option value with respect to changes in volatility of the underlying instrument.
- B. The rate of change of the option value with respect to changes in the price of the underlying instrument.
- C. The sensitivity of the option value to the passage of time.
- D. The sensitivity of the option value to changes risk free interest rate.
Answer: B
NEW QUESTION # 214
Which statements correctly describe the features of using subscription databases for operational loss data analysis?
Subscription databases
I. Provide central data repositories and benchmarking services to their members.
II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.
III. Assist with mapping the events to the appropriate business lines, risk categories and causes.
IV. Reflect only events that are interesting to the press and are reported in the press.
- A. I, II and III
- B. II and III
- C. II, III, and IV
- D. I and II
Answer: A
Explanation:
* Statement I: Subscription databases provide central data repositories and benchmarking services to their members.
* Verified and correct. These databases aggregate data from multiple sources to provide valuable benchmarking information.
* Statement II: Subscription databases can provide insight into whether the losses in a firm reflect the
* usual losses in their industry.
* Verified and correct. By comparing a firm's losses with industry data, firms can identify trends and anomalies.
* Statement III: Subscription databases assist with mapping the events to the appropriate business lines, risk categories, and causes.
* Verified and correct. Proper mapping helps in accurate risk assessment and management.
* Statement IV: Subscription databases reflect only events that are interesting to the press and are reported in the press.
* Incorrect. These databases aim to capture a wide range of operational loss events, not just those reported in the press.
NEW QUESTION # 215
In analyzing market option pricing dynamics, a risk manager evaluates option value changes throughout the
entire trading day. Which of the following factors would most likely affect foreign exchange option values?
I. Change in the value of the underlying
II. Change in the perception of future volatility
III. Change in interest rates
IV. Passage of time
- A. I, II, III
- B. I, II
- C. I, II, III, IV
- D. II, III
Answer: C
NEW QUESTION # 216
Which one of the following statements describes Macauley's duration?
- A. The change in value of a bond when yields increase by 1 basis point.
- B. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- C. The weighted average life of the bond payments.
- D. The percentage change in a bond price when the yields change by 1%.
Answer: C
NEW QUESTION # 217
ThetaBank has extended substantial financing to two mortgage companies, which these mortgage lenders use
to finance their own lending. Individually, each of the mortgage companies has an exposure at default (EAD)
of $20 million, with a loss given default (LGD) of 100%, and a probability of default of 10%. ThetaBank's risk
department predicts the joint probability of default at 5%. If the default risk of these mortgage companies were
modeled as independent risks, what would be the probability of a cumulative $40 million loss from these two
mortgage borrowers?
- A. 10%
- B. 1%
- C. 0.1%
- D. 0.01%
Answer: B
NEW QUESTION # 218
Which one of the four following aspects of legal risk is NOT included in the Basel II Accord?
- A. Exposure to fines
- B. Negative publicity resulting from reputational damages
- C. Punitive damages resulting from supervisory actions
- D. Private settlements
Answer: B
Explanation:
The Basel II Accord addresses several aspects of legal risk including exposure to fines, private settlements, and punitive damages resulting from supervisory actions. However, it does not explicitly include negative publicity resulting from reputational damages. Legal risk under Basel II is primarily focused on tangible financial impacts rather than reputational ones.References:Basel II Accord documents and legal risk definitions.
NEW QUESTION # 219
A credit analyst wants to determine if her bank is taking too much credit risk. Which one of the following four
strategies will typically provide the most convenient approach to quantify the credit risk exposure for the
bank?
- A. Analyzing distribution of bank's credit losses and mapping credit risks at various statistical levels
- B. Using stress testing techniques to forecast underlying macroeconomic factors and bank's idiosyncratic
risks - C. Assessing aggregate exposure at default at various time points and at various confidence levels
- D. Simplifying individual credit exposures so that they can be combined into a simplified expression of
portfolio risk for the bank
Answer: C
NEW QUESTION # 220
Which one of the following four statements about equity indices is INCORRECT?
- A. Equity indices do not trade in cash form, rather, they are meant to track the overall performance of an
equity market. - B. Capitalization-weighted equity indices are not generally considered better to track the performance of an
overall market. - C. Price-weighted equity indices give greater weight to shares trading at high prices.
- D. Equity indices are numerical calculations that reflect the performance of hypothetical equity portfolios.
Answer: B
NEW QUESTION # 221
From the bank's point of view, repricing the retail debt portfolio will introduce risks of fluctuations in:
I. Duration
II. Loss given default
III. Interest rates
IV. Bank spreads
- A. II
- B. I
- C. I, II
- D. III, IV
Answer: D
Explanation:
From the bank's point of view, repricing the retail debt portfolio introduces risks primarily related to fluctuations in interest rates and bank spreads. When interest rates change, the cost of funds for the bank can fluctuate, which affects the interest margins (bank spreads). Additionally, the repricing of existing debt to match current market rates introduces direct exposure to interest rate volatility. Therefore, the risks associated with fluctuations in these areas are III. Interest rates and IV. Bank spreads.
NEW QUESTION # 222
Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On day 2, $1 million in loans is coming in with an expected default rate of 1% and on day 3, $2 million in loans is coming in with expected default rate of 2%. How much should the bank plan to raise in order to avoid liquidity problems?
- A. $550 million
- B. $510 million
- C. $500 million
- D. $508 million
Answer: D
Explanation:
* Day 1:
* Bank Muri has $4 million in cash.
* $5 million in loans coming due with an expected default rate of 1%.
* Proceeds from the loans = $5 million * (1 - 0.01) = $4.95 million.
* Total cash available at the end of Day 1 = $4 million + $4.95 million = $8.95 million.
* No outflows on Day 1.
* Cumulative liquidity = $8.95 million (positive).
* Day 2:
* $1 million in loans with an expected default rate of 1%.
* Proceeds from the loans = $1 million * (1 - 0.01) = $0.99 million.
* Cash inflow = $0.99 million.
* $9 million is due for a securities purchase.
* Cumulative liquidity = $8.95 million + $0.99 million - $9 million = $0.94 million (positive).
* Day 3:
* $2 million in loans with an expected default rate of 2%.
* Proceeds from the loans = $2 million * (1 - 0.02) = $1.96 million.
* Cash inflow = $1.96 million.
* $8 million due for commercial paper pay off.
* Cumulative liquidity = $0.94 million + $1.96 million - $8 million = -$5.1 million (negative).
To avoid liquidity problems, the bank needs to raise $5.1 million to cover the shortfall, but given the options, the closest appropriate figure is $508 million due to a potential typo or error in the options.
References:These calculations are verified against the standard liquidity management scenarios described in the financial documents.
NEW QUESTION # 223
Which of the following statements about a bank's behavior regarding Risk Adjusted Return on Capital (RAROC) is correct?
I. A bank should always seek to maximize their overall RAROC.
II. A bank should consider investing in a business even with negative RAROC if it increases the RAROC of the bank as a whole.
III. A bank should minimize its overall RAROC by controlling the absolute and relative amount of risk of its businesses.
IV. A bank should maximize its RAROC by always investing in a new business that maximizes the RAROC for that business unit.
- A. I and II
- B. I, II and III
- C. II, III, and IV
- D. II and IV
Answer: A
Explanation:
A bank's behavior regarding RAROC should consider:
* Maximizing overall RAROC: This ensures that the bank is efficiently managing its capital and generating the highest possible returns relative to the risks taken.
* Investing in a business even with negative RAROC if it increases the RAROC of the bank as a whole: This can be beneficial if the investment contributes to the diversification or other strategic goals that enhance the bank's overall risk-return profile.
These principles guide banks in optimizing their capital allocation and improving their financial performance.
NEW QUESTION # 224
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 and interest rate risk
- C. Exchange rate and credit risk
- D. Exchange rate risk
Answer: C
Explanation:
When an asset manager for a large mutual fund engages in forward exchange transactions traded in a clearinghouse system, the primary risks that arise are exchange rate risk and credit risk. Exchange rate risk is inherent in any foreign exchange transaction due to potential fluctuations in the currency's value over time.
Credit risk is also significant as it involves the possibility that the counterparty may default on their contractual obligations.
References:Details on the risks associated with forward exchange transactions can be found in the "How Finance Works" document, which discusses the implications and risks of financial instruments, including forward contracts.
NEW QUESTION # 225
A risk associate responsible for the operational risk function wants to evaluate the upward reporting
governance structure and to assess its critical features. Which one of the four attributes does not represent a
critical feature of the upward reporting governance structure?
- A. Relevance
- B. Security
- C. Independence
- D. Importance
Answer: B
NEW QUESTION # 226
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. Speculative bias
- B. Moral hazard
- C. Herd behavior
- D. Adverse selection
Answer: C
NEW QUESTION # 227
In the United States, Which one of the following four options represents the largest component of securitized debt?
- A. Lines of credit
- B. Credit card loans
- C. Real estate loans
- D. Education loans
Answer: C
Explanation:
In the United States, the largest component of securitized debt is represented by real estate loans.
Securitization involves pooling various types of debt instruments, including mortgages, auto loans, credit card debt, and others, and selling them as bonds to investors. The largest portion of this market is dominated by mortgage-backed securities (MBS), which are based on real estate loans. These securities were especially prominent leading up to the 2008 financial crisis and continue to represent a significant share of the securitization market.
NEW QUESTION # 228
A risk associate is trying to determine the required risk-adjusted rate of return on a stock using the Capital
Asset Pricing Model. Which of the following equations should she use to calculate the required return?
- A. Required return = risk-free return + 1/beta x market risk
- B. Required return = risk-free return + beta x (1 - market risk)
- C. Required return = (1-risk free return) + beta x market risk
- D. Required return = risk-free return + beta x market risk
Answer: D
NEW QUESTION # 229
DeltaFin wants to develop a control scoring method for its RCSA program. Which of the following statements regarding scoring methods are correct?
I. DeltaFin can develop a control scoring method that assesses both the design and the performance of the control.
II. DeltaFin can combine the design and performance scores for each control to produce an overall control effectiveness score.
III. DeltaFin can use the control performance scores to compute an overall risk severity score.
IV. DeltaFin can determine its own appropriate control scoring method.
- A. I only
- B. I, II and IV
- C. II and III
- D. II, III, and IV
Answer: B
Explanation:
* Statement I: DeltaFin can develop a control scoring method that assesses both the design and the performance of the control.
* Verified and correct. It is essential to assess both design and performance to ensure that controls are not only well-designed but also effectively implemented.
* Statement II: DeltaFin can combine the design and performance scores for each control to produce an overall control effectiveness score.
* Verified and correct. Combining both scores provides a comprehensive measure of control effectiveness.
* Statement III: DeltaFin can use the control performance scores to compute an overall risk severity score.
* This is not accurate as the risk severity score typically considers the inherent risk and the residual risk after considering the controls, not just the performance scores.
* Statement IV: DeltaFin can determine its own appropriate control scoring method.
* Verified and correct. Organizations have the flexibility to develop their own scoring methods that best fit their operational risk profiles and needs.
NEW QUESTION # 230
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