[Nov 06, 2023] 2016-FRR Exam Dumps 100% Same Q&A In Your Real Exam [Q203-Q226]

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[Nov 06, 2023] 2016-FRR Exam Dumps 100% Same Q&A In Your Real Exam

2016-FRR Test Engine Dumps Training With 345 Questions

QUESTION 203
Which one of the following four statements correctly identifies the Basel II Accord’s definition of operational
risk?

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

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

Operational risk is a risk arising from execution of a company’s business functions.

Operational 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 204
The Sarbanes-Oxley Act includes one of the following four requirements for financial institutions in the
United States:

Risk and control requirements

Market discipline requirements

Capital allocation requirements

Regulatory response to systemic risk requirements

QUESTION 205
Unico Delta stock is trading at $20 per share, its annualized dividend yield is 5% and the 12-month LIBOR is
3%. Given these statistics, the 12-month futures contact will trade at:

$10.08

$20.04

$30.04

$40.08

QUESTION 206
Which one of the following four global markets for financial assets or instruments is widely believed to be the
most liquid?

Equity market.

Foreign exchange market.

Fixed income market

Commodities market

QUESTION 207
Which of the following factors can cause obligors to default at the same time?
I. Obligors may be harmed by exposures to similar risk factors simultaneously.
II. Obligors may exhibit herd behavior.
III. Obligors may be subject to the sampling bias.
IV. Obligors may exhibit speculative bias.

II, III

I, II

III, IV

QUESTION 208
Forward rate agreements (FRA) are:

Exchange traded derivative contracts that allow banks to take positions in forward interest rates.

OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term
interest rates by relying on long-term funding.

Exchange traded derivative contracts that allow banks to take positions in future exchange rates.

OTC derivative contracts that allow banks to take positions in forward interest rates.

QUESTION 209
James Arthur is a customer of a bank who has taken a floating rate loan from the bank. He is concerned that
the rates may rise in the future increasing his payment amount. Which of the following instruments should he
buy to hedge against the rise in interest rates?

Interest rate floor

Interest rate cap

Index amortizing swap

Interest rate swap that receives fixed and pays floating

QUESTION 210
Which of the activities represent examples of market manipulation?

Market gap

Crowded trades

Short squeeze

Stop-loss order

QUESTION 211
By foreign exchange market convention, spot foreign exchange transactions are to be exchanged at the spot
date based on the following settlement rule:

One-day rule

Two-day rule

Three-day rule

Four-day rule

QUESTION 212
Which one of the following four statements regarding the current value of a transaction and its purposes is
INCORRECT?

For cash settled instrument the final market value is used to settle the transaction with the counterparty

Profit and loss calculations are made by comparing the current values to the intrinsic values.

Margin call by futures exchanges are based on the current market value.

Counterparty credit risk calculations are made by analyzing the current values of all deals with the same
counterparty.

QUESTION 213
A large multinational bank is concerned that their duration measures may not be accurate since the yield curve
shifts are not parallel. Which of the following statements would be typically observed regarding variability of
interest rates?

Short-term rates are more variable than long-term rates.

Short-term rates are less variable than long-term rates.

Short-term rates are equally variable as long-term rates.

Short-term rates and long-term rates always move in opposite directions.

QUESTION 214
Which one of the following four formulas correctly identifies the expected loss for all credit instruments?

Expected Loss = Probability of Default x Loss Given Default x Exposure at Default

Expected Loss = Probability of Default x Loss Given Default + Exposure at Default

Expected Loss = Probability of Default x Loss Given Default – Exposure at Default

Expected Loss = Probability of Default x Loss Given Default / Exposure at Default

QUESTION 215
Which one of the following four examples would not be considered a typical source of market risk?

Unexpected changes in the term structure of interest rates.

The JPY depreciating against the USD.

Increased default rate on commercial mortgages due to higher interest rates.

Changes in the oil price due to the discovery of new oil fields.

QUESTION 216
Which one of the following four statements regarding counterparty credit risk is INCORRECT?

Counterparty credit risk refers to the inability to realize gains in a contract with a counterparty due to its
default.

The exposure at default is variable due to fluctuations in swap valuations.

The exposure at default can be negatively correlated to probability of default.

Dynamic collateral provisions often increase counterparty risk considerably.

QUESTION 217
Which one of the following four alternatives lists the three most widely traded currencies on the global foreign
exchange market, as of April 2007, in the decreasing order of market share? EUR is the abbreviation of the
European euro, JPY is for the Japanese yen, and USD is for the United States dollar, respectively.

JPY, EUR, USD

USD, EUR, JPY

USD, JPY, EUR

EUR, USD, JPY

QUESTION 218
Alpha Bank estimates its 1-month, 95% VaR is 30 million EUR. This means that in the next month, there is a

95% chance that AlphaBank can lose more than 30 million EUR.

95% chance that AlphaBank will lose exactly 30 million EUR.

95% chance that AlphaBank can lose at most 30 million EUR.

95% chance that AlphaBank will at least lose 30 million EUR.

QUESTION 219
All of the following factors generally explain the equity bid-offer spread in a market EXCEPT:

Market volatility

Interest rates

Competition among market makers

Market depth

QUESTION 220
If the yield on the 3-month risk free bonds issued by the U.S government is 0.5%, and the 3-month LIBOR
rate is 2.5%, what is the TED spread?

0.5%

-2.0%

2.0%

3.0%

QUESTION 221
An organization’s enterprise risk management framework defines its risk profile and typically reflects the
organization’s
I. Market and credit risks
II. Operational and liquidity risks
III. Strategic and geopolitical risks
IV. Structural developments and industry position

I, II

I, IV

II, III

I, II, III

QUESTION 222
When the cost of gold is $1,100 per bullion and the 3-month forward contract trades at $900, a commodity
trader seeks out arbitrage opportunities in this relationship. To capitalize on any arbitrage opportunities, the
trader could implement which one of the following four strategies?

Short-sell physical gold and take a long position in the futures contract

Take a long position in physical gold and short-sell the futures contract

Short-sell both physical gold and futures contract

Take long positions in both physical gold and futures contract

QUESTION 223
Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?

Assets and liabilities have the same interest rate sensitivities.

Effective repricing date can be different than contractual repricing.

The amount of intermediated funds can be a function of interest rate levels.

Net interest income risk does not address the impact of changing interest rates on bank equity value.

QUESTION 224
Which one of the following four mathematical option pricing models is used most widely for pricing European
options?

The Black model

The Black-Scholes model

The Garman-Kohlhagen model

The Heston model

QUESTION 225
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). 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? What is the expected loss of this loan?

$300

$550

$750

$1,050

QUESTION 226
Which one of the following four statements about regulatory capital for a bank is accurate?

Regulatory capital is determined by rules imposed by an outside authority, such as a supervisor or
central bank.

Regulatory capital is the lowest level of economic capital the bank should have to meet regulatory
requirement.

Regulatory capital reflects the economic tradeoffs of the bank as accurately as the bank can represent
them.

Regulatory capital is less than the regulatory capital requirement.

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