[Jun-2022] 2016-FRR Dumps are Available for Instant Access using PracticeMaterial [Q41-Q62]

NO.41 To estimate the forward price of oil, a commodity trader would most likely use the following pricing
relationship:

NO.42 An endowment asset manager with a focus on long/short equity strategies is evaluating the risks of an equity
portfolio. Which of the following risk types does the asset manager need to consider when evaluating her
diversified equity portfolio?
I. Company-specific projected earnings and earnings risk
II. Aggregate earnings expectations
III. Market liquidity
IV. Individual asset volatility

NO.43 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

NO.44 Which one of the following four examples would not be considered a typical source of market risk?

NO.45 According to Basel II what constitutes Tier 2 capital?

NO.46 How could a bank’s hedging activities with futures contracts expose it to liquidity risk?

NO.47 An options trader for a large institutional investor takes a long equity option position. Which of the following
risks need to be considered when taking this position?
I. All the risks of underlying equities
II. Perceived volatility changes
III. Future dividends yields
IV. Risk-free interest rates

NO.48 Which one of the following four statements correctly defines an option’s delta?

NO.49 To estimate the responsiveness of a particular equity portfolio to the overall market, a trader should use the
portfolio’s

NO.50 Over a long period of time DeltaBank has amassed a large equity option position. Which of the following risks
should be considered in this transaction?
I. Counterparty risk on long OTC option positions
II. Counterparty risk on short OTC option positions
III. Counterparty risk on long exchange-traded option positions
IV. Counterparty risk on short exchange-traded option positions

NO.51 Which of the following assets on the bank’s balance sheet has greatest endogenous liquidity risk?

NO.52 A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. If these CDOs can
be used in a repo transaction at a 20% haircut, what is the maximum leverage factor for a transaction with the
CDOs?

NO.53 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.

NO.54 A credit rating analyst wants to determine the expected duration of the default time for a new three-year loan,
which has a 2% likelihood of defaulting in the first year, a 3% likelihood of defaulting in the second year, and
a 5% likelihood of defaulting the third year. What is the expected duration for this three-year loan?

NO.55 Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is
collateralized with $55,000. 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?

NO.56 Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly
approximates the yield on a risk-free instrument:

NO.57 Modified duration of a bond measures:

NO.58 By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following
outcomes EXCEPT:

NO.59 Which one of the following four statements correctly identifies disadvantages of using the economic capital?

NO.60 Which one of the following four statements correctly identifies the Basel II Accord’s definition of operational
risk?

NO.61 A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off
based on the average price of the underlying asset on either a few specific chosen dates or all dates within a
specific pricing window. Which one of the following four option types would most likely meet these specific
foreign currency demands?

NO.62 Jack Richardson wants to compute the 1-month VaR of a portfolio with a market value of USD 10 million,
with an average monthly return of 1% and average monthly standard deviation of 1.5%. What is the portfolio
VaR at 99% confidence level?
Probability Cumulative Normal distribution
0.90 1.282
0.91 1.341
0.92 1.405
0.93 1.476
0.94 1.555
0.95 1.645
0.96 1.751
0.97 1.881
0.98 2.054
0.99 2.326