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2016-FRR GARP Exam Lab Questions

Page: 7 / 28
Total 387 questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 25

What is the explanation offered by the liquidity preference theory for the upward sloping yield curve shape?

Options:

A.

The long term rates must rise enough to get some borrowers to borrow short-term and some lenders to lend long-term.

B.

The long term rates must rise enough to get some borrowers to borrow long-term and some lenders to lend short-term.

C.

The short term rates must rise enough to get some borrowers to borrow short-term and some lenders to lend long-term.

D.

The short term rates must fall enough to get some borrowers to borrow long-term and some lenders to lend short-term.

Question 26

Which one of the following four model types would assign an obligor to an obligor class based on the risk characteristics of the borrower at the time the loan was originated and estimate the default probability based on the past default rate of the members of that particular class?

Options:

A.

Dynamic models

B.

Causal models

C.

Historical frequency models

D.

Credit rating models

Question 27

Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:

Options:

A.

Exposures can often be netted

B.

Exposure at default may be negatively correlated to the probability of default

C.

Counterparty risk creates a two-way credit exposure

D.

Collateral arrangements are typically static in nature

Question 28

Which one of the following four variables of the Black-Scholes model is typically NOT known at a point in time?

Options:

A.

The underlying relevant exchange rates

B.

The underlying interest rates

C.

The future volatility of the exchange rates

D.

The time to maturity

Page: 7 / 28
Total 387 questions