GARP 2016-FRR Practice Questions| TestInsights

Question 1

Gamma Bank is active in loan underwriting and securitization business, and given its collective credit exposure, it will be typically most interested in the following types of portfolio credit risk:

I . Expected loss

II . Duration

III . Unexpected loss

IV . Factor sensitivities

BII

CI, III

DI, III, IV

Correct : C

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BII

CI, III

DI, III, IV

Question 2

Which one of the following four statements correctly identifies the Basel II Accord's definition of operational risk?

AOperational risk is all the risk that is not captured by market and credit risks.

BOperational risk is the risk of loss resulting from inadequate or failed processes, people and systems or from external events.

COperational risk is a risk arising from execution of a company's business functions.

DOperational risk is a form of risk that summarizes the risks a company or firm undertakes when it attempts to operate within a given field or industry.

Correct : B

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AOperational risk is all the risk that is not captured by market and credit risks.

BOperational risk is the risk of loss resulting from inadequate or failed processes, people and systems or from external events.

COperational risk is a risk arising from execution of a company's business functions.

DOperational risk is a form of risk that summarizes the risks a company or firm undertakes when it attempts to operate within a given field or industry.

Question 3

Which of the following statements is a key difference between customer loans and interbank loans?

ACustomers are less credit-worthy than banks on average and hence yields are higher on average for customer loans as compared to interbank loans

BCustomer loans are of shorter duration than interbank loans

CCustomer loans are easier to sell than interbank loans

DInterbank loans are more customized than commercial loans

Correct : A

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ACustomers are less credit-worthy than banks on average and hence yields are higher on average for customer loans as compared to interbank loans

BCustomer loans are of shorter duration than interbank loans

CCustomer loans are easier to sell than interbank loans

DInterbank loans are more customized than commercial loans

Question 4

Which of the following are the most common methods to increase liquidity in stressed conditions?

I . Selling or securitizing assets.

II . Obtaining additional credit lines.

III . Securing a better credit rating.

BI, II

CI, II, III

DII, III

Correct : B

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BI, II

CI, II, III

DII, III

Question 5

Which one of the following four features is NOT a typical characteristic of futures contracts?

AFixed notional amount per contract

BFixed dates for delivery

CTraded Over-the-counter only

DDaily margin calls

Correct : C

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AFixed notional amount per contract

BFixed dates for delivery

CTraded Over-the-counter only

DDaily margin calls

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