GARP Financial Risk and Regulation (FRR) Series - 2016-FRR Exam Practice Test

Which of the following statements about the interest rates and option prices is correct?

The technique of using interest rate swap positions to reduce the effect of the variability of interest rates on net interest income is known as:

Which one of the following four statements about regulatory capital for a bank is accurate?

Alpha Bank estimates its 1-month, 95% VaR is 30 million EUR. This means that in the next month, there is a

What is a difference between currency swaps and interest rate swaps?

Which one of the following four formulas correctly identifies the expected loss for all credit instruments?

Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct?
RAROC is the ratio of:

In its VaR calculations, JPMorgan Chase uses an expected tail-loss methodology which approximates losses at the 99% confidence level. This methodology consists of two subsequent steps to estimate the VaR. Which of the following explains this two-step methodology?

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?

Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's expected loss be?

Which of the following about the ratios between various Tiers of capital is not a requirement of the Basel Committee?

After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a result it ___ return on equity for the bank.