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

The Treasury function of a bank typically manages all of the following components EXCEPT:

Which one of the following does the Basel I Accord fail to take into consideration?

Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while the risk of loss to the other large bank will increase. By running the trades through a clearinghouse, the small bank can achieve all of the following objectives EXCEPT:

Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly approximates the yield on a risk-free instrument:

What do option deltas measure?

Rising TED spread is typically a sign of increase in what type of risk among large banks?
I. Credit risk
II. Market risk
III. Liquidity risk
IV. Operational risk

A bank customer chooses a mortgage with low initial payments and payments that increase over time because the customer knows that she will have trouble making payments in the early years of the loan. The bank makes this type of mortgage with the same default assumptions uses for ordinary mortgages, thus underestimating the risk of default and becoming exposed to:

What does Pillar 2 of the Basel II Accord focus on?

Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). 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? What is the expected loss of this loan?

Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew.
How much money should the bank plan to raise so as to avoid a liquidity problem?

What is the objective of a bank's risk management department?

Which one of the following four statements regarding scenario analysis is correct?

Of all the risk factors in loan pricing, which one of the following four choices is likely to be the least significant?

Which one of the following four statements regarding bank's exposure to credit and default risk is INCORRECT?