EFFICIENT 2016-FRR VALID STUDY GUIDE HELP YOU TO GET ACQUAINTED WITH REAL 2016-FRR EXAM SIMULATION

Efficient 2016-FRR Valid Study Guide Help You to Get Acquainted with Real 2016-FRR Exam Simulation

Efficient 2016-FRR Valid Study Guide Help You to Get Acquainted with Real 2016-FRR Exam Simulation

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Tags: 2016-FRR Valid Study Guide, 2016-FRR Practice Exam Pdf, 2016-FRR Test Preparation, 2016-FRR Prep Guide, Test 2016-FRR Lab Questions

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GARP 2016-FRR certification exam covers a wide range of topics related to risk management and regulation, including financial risk management, regulatory compliance, and risk governance. 2016-FRR Exam is designed to test candidates' knowledge and understanding of these topics, as well as their ability to apply this knowledge in practical situations.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q207-Q212):

NEW QUESTION # 207
A risk manager is analyzing a call option on the GBP with a vega of 0.02. When the perceived future volatility increases by 1%, the call option

  • A. Decreases in value by 0.02.
  • B. Increases in value by 2.
  • C. Increases in value by 0.02.
  • D. Decreases in value by 2.

Answer: C

Explanation:
Vega represents the sensitivity of an option's price to changes in the volatility of the underlying asset. If a call option on the GBP has a Vega of 0.02, this means that for every 1% increase in the perceived future volatility, the price of the call option will increase by 0.02. Therefore, if the volatility increases by 1%, the call option's value increases by 0.02.


NEW QUESTION # 208
A risk associate is trying to determine the required risk-adjusted rate of return on a stock using the Capital Asset Pricing Model. Which of the following equations should she use to calculate the required return?

  • A. Required return = risk-free return + 1/beta x market risk
  • B. Required return = risk-free return + beta x (1 - market risk)
  • C. Required return = risk-free return + beta x market risk
  • D. Required return = (1-risk free return) + beta x market risk

Answer: C

Explanation:
* The Capital Asset Pricing Model (CAPM) equation used to calculate the required return on a stock is:Required return = risk-free return + beta × (market risk premium).
* This formula helps determine the return an investor should expect for taking on additional risk compared to a risk-free asset.


NEW QUESTION # 209
Which of the following measure describes the symmetry of a statistical distribution?

  • A. Mean
  • B. Kurtosis
  • C. Standard deviation
  • D. Skewness

Answer: D


NEW QUESTION # 210
Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a foreign exchange option?

  • A. Underlying interest rates
  • B. Discrete future stock prices
  • C. Underlying exchange rates
  • D. Option exercise price

Answer: B

Explanation:
The Black-Scholes model does not require discrete future stock prices as an input. Instead, it uses the current price of the underlying asset, the option's strike price, time to maturity, risk-free interest rate, and the volatility of the underlying asset. The model assumes that the price of the underlying asset follows a continuous stochastic process and not discrete intervals.
References:This non-requirement of discrete future stock prices in the Black-Scholes model is confirmed in the "How Finance Works" document, which details the necessary inputs for the model.


NEW QUESTION # 211
Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD
10 million at the same confidence level. Which bank is in a more risky position as measured by VaR?

  • A. Since the confidence levels are the same we cannot make any conclusions.
  • B. Bank H is taking twice the risk of bank G as measured by VaR.
  • C. Bank G is taking twice the risk of bank H as measured by VaR.
  • D. Both banks are equally risky since the measurements are with the same confidence level.

Answer: C

Explanation:
Value at Risk (VaR) is a statistical measure used to assess the risk of loss on a specific portfolio of financial assets. In this case, Bank G has a 1-year VaR of USD 20 million at 99% confidence level, while Bank H has a
1-year VaR of USD 10 million at the same confidence level. The VaR figure indicates the maximum potential loss over a given period (1 year) at a certain confidence level (99%). Therefore, Bank G is taking twice the risk of Bank H as the VaR is double that of Bank H.


NEW QUESTION # 212
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