Latest 2016-FRR Pass Guaranteed Exam Dumps Certification Sample Questions
New 2016-FRR Test Materials & Valid 2016-FRR Test Engine
NEW QUESTION 122
An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she
can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___
risk on the contract and always receives a premium.
- A. Never, unlimited
- B. Never, limited
- C. Sometimes, unlimited
- D. Sometimes, limited
Answer: A
NEW QUESTION 123
Which one of the following four statements about the relationship between exchange rates and option values is
correct?
- A. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate
increases. - B. As the dollar appreciates relative to the pound, the right to sell dollars at a fixed pound exchange rate
increases. - C. As the dollar depreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate
increases. - D. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate
decreases.
Answer: A
NEW QUESTION 124
Typically, which one of the following four option risk measures will be used to determine the number of
options to use to hedge the underlying position?
- A. Theta
- B. Delta
- C. Vega
- D. Rho
Answer: B
NEW QUESTION 125
Which one of the following four factors typically drives the pricing of wholesale products?
- A. Overall risk exposure
- B. Prevailing market price
- C. Long-term competitiveness
- D. Marketing considerations
Answer: B
NEW QUESTION 126
Which one of the following four features is NOT a typical characteristic of futures contracts?
- A. Fixed notional amount per contract
- B. Traded Over-the-counter only
- C. Fixed dates for delivery
- D. Daily margin calls
Answer: B
NEW QUESTION 127
Which one of the following four statements correctly identifies disadvantages of using the economic capital?
- A. Since banks are putting their money at risk they have an incentive to increase economic capital.
- B. Economic capital estimates the level of expected losses.
- C. Economic capital may do not take into consideration the regulatory requirements.
- D. The economic capital models used by banks may be subject to significant model risk.
Answer: D
NEW QUESTION 128
For two variables, which of the following is equal to the average product of the deviations from their
respective means?
- A. Correlation
- B. Covariance
- C. Kurtosis
- D. Standard deviation
Answer: B
NEW QUESTION 129
Which one of the four following statements about drawdowns is correct?
- A. Drawdown estimates the effect on bank's liabilities when the bank's credit rating is cut.
- B. Drawdown calculates significant losses in a particular business or a book.
- C. Drawdown measures the aggregate decline in market values of assets and positions due to a shock.
- D. Drawdown quantifies the peak-to-trough decline of an investment over a known time period.
Answer: D
NEW QUESTION 130
Which one of the four following statements about back testing the VaR models is correct?
Back testing requires
- A. Plotting the daily profit and losses along with the ranges predicted by VaR models
- B. Plotting VaR forecasts against the proportion of daily losses exceeding the average loss.
- C. Determining the proportion of daily profits exceeding those predicted by VaR.
- D. Comparing the predictive ability of VaR on a daily basis to the realized daily profits and losses.
Answer: D
NEW QUESTION 131
Which one of the following four statements correctly defines a typical carry trade?
- A. A bank borrows funds in a high-interest currency and places the funds in a long-term low volatility
investment vehicle. - B. A bank borrows funds in a low-interest currency, accumulates reserves, and lends in another
low-interest currency. - C. A bank borrows funds in a high-interest currency and invests the funds into high-yield emerging market
debt. - D. A bank borrows funds in a low-interest currency and places the funds on deposit in a high-interest
currency.
Answer: D
NEW QUESTION 132
Which of the following statements is a key difference between customer loans and interbank loans?
- A. Customer loans are easier to sell than interbank loans
- B. Customers are less credit-worthy than banks on average and hence yields are higher on average for
customer loans as compared to interbank loans - C. Interbank loans are more customized than commercial loans
- D. Customer loans are of shorter duration than interbank loans
Answer: B
NEW QUESTION 133
Which one of the following four statements correctly defines chooser options?
- A. These options pay an amount equal to the power of the value of the underlying asset above the strike
price. - B. These options represent a variation of the plain vanilla option where the underlying asset is a basket of
currencies. - C. These options give the holder the right to exchange one asset for another.
- D. The owner of these options decides if the option is a call or put option only when a predetermined date
is reached.
Answer: D
NEW QUESTION 134
Modified duration of a bond measures:
- A. The percentage change in a bond price when the yields change by 1%.
- B. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- C. The change in value of a bond when yields increase by 1 basis point.
- D. The percentage change in a bond price when yields increase by 1 basis point.
Answer: A
NEW QUESTION 135
Which one of the following market risk measures evaluates the bank's earnings sensitivity?
- A. Value-at-risk back testing
- B. Earnings-at-risk stress testing
- C. Cash flow stress testing
- D. Large exposure risk identification
Answer: B
NEW QUESTION 136
Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest
income, Beta Insurance Company should invest in bonds with which of the following ratings?
- A. A
- B. B
- C. AA
- D. AAA
Answer: A
NEW QUESTION 137
A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have
been made incorrectly. When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to
determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.
- A. The inherent risk of lending to this borrower while providing a return on the risk capital used to the
support the loan. - B. The overhead cost of maintaining the loan and the account.
- C. The marginal cost of funds provided.
- D. The opportunity cost of risk-adjusted marginal cost of capital.
Answer: D
NEW QUESTION 138
Which of the following bank events could stress the bank's liquidity position?
I. Obligations to fund assets like mortgages
II. Unusually large depositor withdrawals
III. Counterparty collateral calls
IV. Nonperforming assets
- A. III, IV
- B. I, II, III and IV
- C. I, II
- D. IV
Answer: B
NEW QUESTION 139
Which of the following are among the main uses of risk reports?
I. Identification of exceptional situations that require managerial attention.
II. Display the relative risk among different trades.
III. Specify how RAROC will be maximized within the bank.
IV. Estimate the overall risk levels of the bank.
- A. II and III
- B. II and IV
- C. I, II and IV
- D. II, III, and IV
Answer: C
NEW QUESTION 140
Which one of the four following statements about consortium databases is correct?
Consortium databases
- A. Gather information from news articles.
- B. Use data from the top 5% of the industry.
- C. Provide data to map risk categories with causes.
- D. Contain anonymous information.
Answer: D
NEW QUESTION 141
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