[Q81-Q97] Get 100% Passing Success With True 2016-FRR Exam! [Mar-2023]

NEW QUESTION 81
Which one of the following four metrics represents the difference between the expected loss and unexpected
loss on a credit portfolio?

Credit VaR

Probability of default

Loss given default

Modified duration

NEW QUESTION 82
A credit associate extending a loan to an obligor suspects that the obligor may change his behavior after the
loan has been originated. The obligor in this case may use the loan proceeds for purposes not sanctioned by the
lender, thereby increasing the risk of default. Hence, the credit associate must estimate the probability of
default based on the assumptions about the applicability of the following tendency to this lending situation:

Speculation

Short bias

Moral hazard

Adverse selection

NEW QUESTION 83
A key function of treasuries in commercial/retail banks is:
I. To manage the interest margin of the banks.
II. To focus on underwriting risk.
III. To ensure strong earnings.
IV. To increase profit margins.

II, III

III, IV

NEW QUESTION 84
For two variables, which of the following is equal to the average product of the deviations from their
respective means?

Standard deviation

Kurtosis

Correlation

Covariance

NEW QUESTION 85
Which one of the following four attributes would likely help a trader using exchange-traded options to
establish a leveraged position?

Higher degrees of exposure at less cash cost

Unlimited losses for long option positions

Option positions have the same credit risks as a margined long forward.

Option positions have the same cash risks as a margined short futures purchase.

NEW QUESTION 86
Operational risk team for a large international bank is implementing business continuity planning (BCP).
Which of the following BCP activities fall within the definition of operational risk and represent Basel II
Accord’s operational risk categories:
I. Damage to Physical Assets
II. Business Disruption and System Failures
III. Social Distancing Requirements
IV. Potential for Extreme Losses

I and II

III

I and IV

III and IV

NEW QUESTION 87
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the
likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no
credit losses.

Symmetric; less

Symmetric; greater

Asymmetric; less

Asymmetric; greater

NEW QUESTION 88
Which one of the following four statements correctly describes an American call option?

An American call option gives the buyer of that call option the right to buy the underlying instrument on
any date up to and including the expiry date.

An American call option gives the buyer of that call option the right to sell the underlying instrument on
any date up to and including the expiry date.

An American call option gives the buyer of that call option the right to buy the underlying instrument on
the expiry date.

An American call option gives the buyer of that call option the right to sell the underlying instrument on
the expiry date.

NEW QUESTION 89
Which one of the following four models is typically used to grade the obligations of small- and medium-size
enterprises?

Causal models

Historical frequency models

Credit scoring models

Credit rating models

NEW QUESTION 90
Which one of the following statements correctly identifies risks in foreign exchange forwards?

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.

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.

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.

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.

NEW QUESTION 91
The pricing of credit default swaps is a function of all of the following EXCEPT:

Probability of default

Duration

Loss given default

Market spreads

NEW QUESTION 92
Which of the following bank events could stress the bank’s liquidity position?
I. Maturing of bank debt
II. Repurchase agreements
III. Futures margins
IV. Staff turnover

I, II

III, IV

I, II and III

NEW QUESTION 93
Which one of the following statements about futures contracts is correct?
I. Futures contracts are subject to the same risks as the underlying instruments.
II. Futures contracts have additional interest rate risk die to the future delivery date.
III. Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.

I, III

II, III

I, II, III

NEW QUESTION 94
Which of the following statements regarding CDO-squared is correct?
I. CDO-squared use other CDOs and CMOs as collateral.
II. Risk assessment of CDO-squared is almost impossible due to their complexity.
III. CDO-squared have lower credit risk than CMOs but higher than CDOs.

I only

I and II

II and III

I, II, and III

NEW QUESTION 95
Which one of the following four statements correctly defines a non-exotic call option?

A call option gives the call option buyer the obligation, but not the right, to buy the underlying
instrument at a known price in the future.

A call option gives the call option buyer the obligation, but not the right, to sell the underlying
instrument at a known price in the future

A call option gives the call option buyer the right, but not the obligation, to buy the underlying
instrument at a known price in the future

A call option gives the call option buyer the right, but not the obligation, to sell the underlying
instrument at a known price in the future

NEW QUESTION 96
Which of the following measure describes the symmetry of a statistical distribution?

Mean

Standard deviation

Skewness

Kurtosis

NEW QUESTION 97
Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD
10 million at 95% confidence level. Which bank is in a more risky position as measured by VaR?

Bank G is taking twice the risk of bank H as measured by VaR.

Bank H is taking twice the risk of bank G as measured by VaR.

Since the confidence levels are not the same we cannot make any conclusions.

Both banks are equally risky since the measurements are with the same confidence level.