2016-FRR Exam Study Solutions & Training 2016-FRR Material

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GARP 2016-FRR Exam is an essential certification for anyone working in the financial industry. It provides a comprehensive understanding of the complex regulations and risks that financial professionals face, and it helps professionals develop the skills and knowledge they need to succeed in their careers. Whether you're a risk manager, a financial analyst, or an energy trader, the FRR Series can help you take your career to the next level.

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The FRR Series offered by GARP is an essential certification for professionals working in financial risk management or regulatory compliance. It covers a wide range of topics and is recognized as a mark of excellence by employers and colleagues. While preparing for the exams can be challenging, the knowledge and skills gained from studying for the FRR exams can help professionals improve their decision-making and risk management abilities.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q272-Q277):

NEW QUESTION # 272
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:

A. Sampling bias
B. Moral hazard
C. Adverse selection
D. Banking speculation

Answer: C

NEW QUESTION # 273
The operational risk policy should include:
I. The firm's definition of risk
II. The governance of operational risk including who owns it, what it owns, and how issues should be
escalated
III. The main activities and elements that are managed by the operational risk function

A. I, II, III
B. I, III
C. II, III
D. I, II

Answer: A

NEW QUESTION # 274
For which one of the following four reasons do corporate customers use foreign exchange derivatives?
I. To lock in the current value of foreign-denominated receivables
II. To lock in the current value of foreign-denominated payables
III. To lock in the value of expected future foreign-denominated receivables
IV. To lock in the value of expected future foreign-denominated payables

A. I and IV
B. II and III
C. I, II, III, IV
D. II

Answer: C

NEW QUESTION # 275
Which one of the following four statements about economic capital of a bank is correct?

A. Economic capital is the present value of the earnings generated by the bank in the future.
B. Economic capital is determined by rules imposed by an external authority.
C. Economic capital measures how the economy is doing compared to the bank.
D. Economic capital reflects the possible losses that could occur based on the bank's own estimates of the risks it is taking.

Answer: D

Explanation:
Economic capital is a risk measure used by banks to determine the amount of capital they need to hold to remain solvent and cover potential losses:
* Internal Risk Estimates: Unlike regulatory capital, which is determined by external regulatory requirements, economic capital is based on the bank's own risk assessment models and internal estimates of potential losses.
* Risk Types: It considers a range of risks including credit risk, market risk, operational risk, and other financial risks that the bank might face.
* Purpose: The goal is to ensure the bank has enough capital to absorb unexpected losses and to maintain confidence among depositors and investors.
Therefore, economic capital is a measure of the potential losses based on the bank's internal risk estimates.
References: How Finance Works, detailed discussions on economic capital and risk management.

NEW QUESTION # 276
Which one of the following four models is typically used to grade the obligations of small- and medium-size enterprises?

A. Causal models
B. Historical frequency models
C. Credit rating models
D. Credit scoring models

Answer: D

Explanation:
* Model Definition: Credit scoring models are typically used to grade the creditworthiness of small- and medium-sized enterprises (SMEs).
* Application: These models evaluate the credit risk of SMEs by considering various financial and non-financial parameters, providing a systematic and quantitative method to determine credit scores.

NEW QUESTION # 277
......

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2016-FRR Exam Study Solutions & Training 2016-FRR Material

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q272-Q277):

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