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GARP 2016-FRR Actual Questions

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Total 387 questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 53

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 have 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, the actual probability would be underestimated by:

Options:

A.

1%

B.

2%

C.

3%

D.

4%

Question 54

All of the four following exotic options are path-independent options, EXCEPT:

Options:

A.

Chooser options

B.

Power options

C.

Asian options

D.

Basket options

Question 55

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

Options:

A.

I

B.

II

C.

I, II

D.

III, IV

Question 56

Which one of the following four examples would not be considered a typical source of market risk?

Options:

A.

Unexpected changes in the term structure of interest rates.

B.

The JPY depreciating against the USD.

C.

Increased default rate on commercial mortgages due to higher interest rates.

D.

Changes in the oil price due to the discovery of new oil fields.

Page: 14 / 28
Total 387 questions