Free Access GARP.2016-FRR.v2022-02-19.q125 Practice Test (Page 23)

Question 106

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

A.The Black-Scholes model

B.The Heston model

C.The Black model

D.The Garman-Kohlhagen model

Question 107

Which one of the following four factors typically drives the pricing of wholesale products?

A.Overall risk exposure

B.Marketing considerations

C.Prevailing market price

D.Long-term competitiveness

Question 108

To estimate a partial change in option price, a risk manager will use the following formula:

A.Partial change in option price = Delta x Gamma x (1+ Change in underlying price)

B.Partial change in option price = Delta x (1+ Change in underlying price)

C.Partial change in option price = Delta x Change in underlying price

D.Partial change in option price = Delta x Gamma x Change in underlying price

Question 109

A multinational bank just bought two bonds each worth $10,000. One of the bonds pays a fixed interest of 5%
semi-annually and the other pays LIBOR semi-annually. The six month LIBOR is at 5% currently. The risk
manager of the bank is concerned about the sensitivity to interest rates. Which of the following statements are
true?

A.Both bond prices are equally sensitive to interest rates.

B.The given information is not enough to determine the sensitivity of the bond prices.

C.The price of the bond paying floating interest is more sensitive to interest rates than the bond paying
fixed interest.

D.The price of the bond paying fixed interest is more sensitive to interest rates than the bond paying
floating interest.

Question 110

Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk
is correct?

A.Both parametric and nonparametric methods make no assumptions about return distributions.

B.Parametric methods generally assume returns are normally distributed, and non-parametric methods
make no assumptions about return distributions.

C.Parametric methods make no assumptions about return distributions, and non-parametric methods
assume returns are normally distributed.

D.Both parametric and nonparametric methods assume returns are normally distributed.

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Question 106

Question 107

Question 108

Question 109

Question 110

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