Online Access Free 2016-FRR Practice Test

Which one of the following four statements best describes challenges of delta-normal method of mapping options positions?
Delta-normal method understates

• A.Risks of long and short positions for both calls and puts.
• B.Risks of short option positions and overstates risks of long option positions for both calls and puts.
• C.Risks of long option positions for puts and overstates risks of short option positions for calls.
• D.Risks of long option positions for calls and overstates risks of short option positions for puts.

Which one of the following four statements about market risk is correct? Market risk is

• A.The exposure to an adverse change in the market value of portfolios and financial instruments caused by a change in market prices or rates.
• B.The exposure to an adverse change in the credit quality in portfolios or of financial instruments.
• C.The maximum likely loss in the market value of portfolios and financial instruments caused by the failure of the counterparty to meet its obligations.
• D.The maximum likely loss in the market value of portfolios and financial instruments over a given period of time.

According to the principles of the Basel II Accord, the implementation and relative weights of the elements of the operational risk framework depend on:
I. The culture of the financial institution
II. Regulatory drivers
III. Business drivers
IV. The bank's reporting currency

• A.II, IV
• B.I, II, III
• C.I, IV
• D.II, III

Which of the following correctly identifies reasons for collecting internal operational risk event and loss information?
I. Assessing the risk of specific areas of concern.
II. Evaluating risk events and outcomes.
III. Collecting data for capital modeling.
IV. Getting insight into risk events in other firms in the industry.

• A.II, III, and IV
• B.I and II
• C.I, II and III
• D.II and III

Which of the following statements about endogenous and external types of liquidity are accurate?
I. Endogenous liquidity is the liquidity inherent in the bank's assets themselves.
II. External liquidity is the liquidity provided by the bank's liquidity structure to fund its assets and maturing liabilities.
III. External liquidity is the non-contractual and contingent capital supplied by investors to support the bank in times of liquidity stress.
IV. Endogenous liquidity is the same as funding liquidity.

• A.I, III
• B.I, II, IV
• C.II, III
• D.I, II