Most UptoDate GARP 2016-FRR Exam Dumps PDF 2022
100% Free Financial Risk and Regulation 2016-FRR Dumps PDF Demo Cert Guide Cover
NEW QUESTION 80
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. Flexible volume options
- B. Compound options
- C. Asian options
- D. American options
Answer: C
NEW QUESTION 81
Which one of the following four statements about economic capital of a bank is correct?
- A. Economic capital reflects the possible losses that could occur based on the bank's own estimates of the
risks it is taking. - B. Economic capital is determined by rules imposed by an external authority.
- C. Economic capital measures how the economy is doing compared to the bank.
- D. Economic capital is the present value of the earnings generated by the bank in the future.
Answer: A
NEW QUESTION 82
Mega Bank holds a $250 million mortgage loan portfolio, which reprices every 5 years at LIBOR + 10%. The
bank also has $150 million in deposits that reprices every month at LIBOR + 3%. What is the amount of Mega
Bank's rate sensitive liabilities?
- A. $150 million
- B. $200 million
- C. $250 million
- D. $100 million
Answer: A
NEW QUESTION 83
Which one of the following four regulatory drivers for operational risk management includes risk and control
requirements for financial statements in the United States?
- A. The Markets in Financial Instruments Directive
- B. Basel II Accord
- C. Solvency II
- D. The Sarbanes-Oxley Act
Answer: D
NEW QUESTION 84
A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use
options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation,
what is the overall exposure to USD depreciation?
- A. His overall portfolio has the same exposure to USD as a portfolio that is short USD 5 million.
- B. His overall portfolio has the same exposure to USD as a portfolio that is long USD 10 million.
- C. His overall portfolio has the same exposure to USD as a portfolio that is short USD 10 million.
- D. His overall portfolio has the same exposure to USD as a portfolio that is long USD 5 million.
Answer: D
NEW QUESTION 85
A bank has a large number of auto loans and would prefer to sell them to raise cash for more funding.
However, selling individual auto loans is difficult. What could the bank do?
- A. Obtain a stronger credit rating so that the bank could borrow at a cheaper rate.
- B. Set up a marketing team to sell individual loans to investors.
- C. Package the loans into a securitized vehicle and sell the low risk portion of the portfolio.
- D. Merge with another bank.
Answer: C
NEW QUESTION 86
A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off
based on the average price of the underlying asset on either a few specific chosen dates or all dates within a
specific pricing window. Which one of the following four option types would most likely meet these specific
foreign currency demands?
- A. Chooser options
- B. Asian options
- C. American options
- D. European options
Answer: B
NEW QUESTION 87
When the cost of gold is $1,100 per bullion and the 3-month forward contract trades at $900, a commodity
trader seeks out arbitrage opportunities in this relationship. To capitalize on any arbitrage opportunities, the
trader could implement which one of the following four strategies?
- A. Short-sell physical gold and take a long position in the futures contract
- B. Take long positions in both physical gold and futures contract
- C. Take a long position in physical gold and short-sell the futures contract
- D. Short-sell both physical gold and futures contract
Answer: A
NEW QUESTION 88
Bank Milo 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
what days does the bank face negative cumulative liquidity?
- A. Day 2 only.
- B. Days 1, 2 and 3.
- C. Day 3 only.
- D. Days 2 and 3.
Answer: D
NEW QUESTION 89
To hedge equity exposure without buying or selling shares of stock or otherwise rebalancing the portfolio, a
risk manager could initiate
- A. A short total return swap position.
- B. A short debt-for-equity swap.
- C. A long debt-for-equity swap.
- D. A long total return swap position.
Answer: A
NEW QUESTION 90
As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in
value against other currencies.
- A. Reduces, reduces, appreciate
- B. Increases, reduces, appreciate
- C. Reduces, reduces, depreciate
- D. Reduces, increases, depreciate
Answer: A
NEW QUESTION 91
Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct?
RAROC is the ratio of:
- A. Profitability to the risk of a trading portfolio or bank business unit.
- B. Profitability to the expected return of a trading portfolio or bank business unit.
- C. Risk to the profitability of a trading portfolio or a business unit within the bank.
- D. Value-at-risk to the profitability of a trading portfolio or a business unit.
Answer: A
NEW QUESTION 92
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. III, IV
- B. II, III
- C. I, II, III, IV
- D. I, II
Answer: C
NEW QUESTION 93
A corporate bond was trading with 2%probability of default and 60% loss given default. Due to the credit
crisis the probability of default increased to 10% and the loss given default increased to 100%. Assuming that
the risk premium remained the same how did the credit spread change?
- A. Increased by 1000 basis points
- B. Decreased by 880 basis points
- C. Increased by 1120 basis points
- D. Increased by 880 basis points
Answer: D
NEW QUESTION 94
An endowment asset manager with a focus on long/short equity strategies is evaluating the risks of an equity
portfolio. Which of the following risk types does the asset manager need to consider when evaluating her
diversified equity portfolio?
I. Company-specific projected earnings and earnings risk
II. Aggregate earnings expectations
III. Market liquidity
IV. Individual asset volatility
- A. I, II, IV
- B. I, IV
- C. II, III
- D. I
Answer: C
NEW QUESTION 95
The data available to estimate the statistical distribution of bank losses is difficult to assemble for which of the
following reasons?
I. The needed data is vast in quantity.
II. The data requires bringing together significantly different measures of risk.
III. Some risks are difficult to quantify and hence the data might involve subjective elements.
- A. I, II, III
- B. II, III
- C. I, III
- D. I, II
Answer: B
NEW QUESTION 96
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