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The Global Association of Risk Professionals (GARP) is an internationally recognized professional organization that is dedicated to the advancement of the risk management profession. The organization offers a range of educational programs, certifications, and resources that help risk professionals develop the skills and knowledge needed to navigate the complex landscape of financial risk. One of the key offerings of GARP is the Financial Risk and Regulation (FRR) Series Exam.
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GARP 2016-FRR certification exam covers a wide range of topics related to risk management and regulation, including financial risk management, regulatory compliance, and risk governance. 2016-FRR Exam is designed to test candidates' knowledge and understanding of these topics, as well as their ability to apply this knowledge in practical situations.
GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q117-Q122):
NEW QUESTION # 117
Which one of the following statements correctly identifies risks in foreign exchange forwards?
- A. Short-term forward price fluctuations are driven by changes in the spot exchange rate, since most
inter-country interest rates differentials are significant, and the effect of compounding is large for short
periods of time.
- B. Long-term forward price fluctuations are driven by changes in the spot exchange rate, since most
inter-country interest rates differentials are small, and the effect of compounding is large for short
periods of time.
- C. Long-term forward price fluctuations are driven by changes in the spot exchange rate, since most
inter-country interest rates differentials are significant, and the effect of compounding is small for short
periods of time.
- D. Short-term forward price fluctuations are driven by changes in the spot exchange rate, since most
inter-country interest rates differentials are small, and the effect of compounding is small for short
periods of time.
Answer: D
NEW QUESTION # 118
Bank customers traditionally trade commodity futures with banks in order to achieve which of the following goals?
I. To express their own price views
II. To reverse undesired short-term exposure created from fixed commodity sales III. To reach short-term budgetary targets
- A. I
- B. I, II, III
- C. II
- D. I, III
Answer: B
Explanation:
* Bank customers trade commodity futures for various reasons including expressing their own price views, reversing undesired short-term exposure from fixed commodity sales, and reaching short-term budgetary targets.
* Each of these goals involves managing price risk or speculative opportunities, which are fundamental uses of futures contracts in commodity markets.
NEW QUESTION # 119
A risk manager is analyzing a call option on the GBP with a vega of 0.02. When the perceived future volatility increases by 1%, the call option
- A. Increases in value by 2.
- B. Decreases in value by 0.02.
- C. Increases in value by 0.02.
- D. Decreases in value by 2.
Answer: C
Explanation:
Vega represents the sensitivity of an option's price to changes in the volatility of the underlying asset. If a call option on the GBP has a Vega of 0.02, this means that for every 1% increase in the perceived future volatility, the price of the call option will increase by 0.02. Therefore, if the volatility increases by 1%, the call option's value increases by 0.02.
NEW QUESTION # 120
Which one of the following four statements does identify correctly the relationship between the value of an
option and perceived exchange rate volatility?
- A. As the perceived future foreign exchange volatility decreases, the value of all options increases.
- B. Option values can only change due to the factors related to the demand for specific options
- C. As the perceived future foreign exchange volatility increases, the value of all options increases.
- D. With increases in perceived future foreign exchange volatility, the value of all foreign exchange
Answer: C
NEW QUESTION # 121
Which one of the four following aspects of legal risk is NOT included in the Basel II Accord?
- A. Private settlements
- B. Punitive damages resulting from supervisory actions
- C. Exposure to fines
- D. Negative publicity resulting from reputational damages
Answer: D
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 # 122
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