2016-FRR Braindumps Torrent Pass Certify| High Pass-Rate Reliable 2016-FRR Test Braindumps: Financial Risk and Regulation (FRR) Series

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The Global Association of Risk Professionals (GARP) is known for providing the highest quality education and certification programs in the field of risk management. The Financial Risk and Regulation (FRR) Series is one of the most popular and respected certifications offered by GARP. Financial Risk and Regulation (FRR) Series certification is designed to equip professionals with the knowledge and skills required to navigate the constantly changing financial environment.

Preparing for the GARP 2016-FRR Certification Exam requires a significant investment of time and effort. Candidates are encouraged to study the exam syllabus in detail and to review relevant textbooks, articles, and other resources. Many candidates also choose to attend training courses or workshops offered by GARP or other training providers. In addition, candidates are advised to practice exam-style questions and to develop a strong understanding of the exam format and structure.

Obtaining the GARP 2016-FRR Certification can help professionals advance their careers and increase their earning potential. Employers often seek candidates who hold this certification because it demonstrates a high level of knowledge and expertise regarding financial risk and regulation. Additionally, the certification can help individuals stand out in a competitive job market and can provide a certain level of prestige and recognition within the industry. Overall, the GARP 2016-FRR Certification is a valuable credential for anyone working in the field of financial risk and regulation.

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q128-Q133):

NEW QUESTION # 128
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta defaults, the bank expects to lose 50% of its promised payment.
What may happen to the Delta's initial credit parameter and the value of its loan if the machinery industry experiences adverse structural changes?

A. Probability of default and loss at default may decrease simultaneously, while duration falls causing the loan value to decrease.
B. Probability of default and loss at default may increase simultaneously, while duration falls causing the loan value to decrease.
C. Probability of default and loss at default may decrease simultaneously, while duration rises causing the loan value to decrease.
D. Probability of default and loss at default may increase simultaneously, while duration rises causing the loan value to decrease.

Answer: D

Explanation:
* Probability of Default (PD) Increase: If the machinery industry experiences adverse structural changes, the economic conditions worsen for Delta Industrial Machinery Corporation. This results in a higher likelihood of financial distress and potential default. Therefore, the probability of default increases.
* Loss Given Default (LGD) Increase: In the event of adverse structural changes, the recovery rates on the loan may diminish due to potential decreases in the value of the company's assets. Hence, the bank might face higher losses if Delta defaults, leading to an increase in the loss given default.
* Duration and Loan Value: An increase in both PD and LGD generally signifies greater risk. To compensate for this increased risk, the loan might be extended or restructured, leading to a longer duration. Higher risk and longer duration typically decrease the present value of the loan, as the expected cash flows are discounted more heavily due to the increased risk.

NEW QUESTION # 129
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 calls and overstates risks of short option positions for puts.
D. Risks of long option positions for puts and overstates risks of short option positions for calls.

Answer: C

Explanation:
The delta-normal method, which uses the delta to approximate the change in the price of an option, has limitations when dealing with options. This method can significantly misrepresent the risks associated with options, particularly because it only considers the linear component of the price change (delta) and ignores the convexity (gamma). Specifically, it tends to understate the risks of long positions in calls because it does not fully account for the increasing delta as the underlying asset price rises, leading to potential underestimation of the risk. Conversely, it overstates the risks of short positions in puts, as the delta of puts decreases less dramatically when the price of the underlying asset falls.

NEW QUESTION # 130
John owns a bond portfolio worth $2 million with duration of 10. What positions must he take to hedge this
portfolio against a small parallel shifts in the term structure.

A. Long position worth $20 million with duration of 1.
B. Short position worth $2 million with duration of 10.
C. Long position worth $2 million with duration of 10.
D. Short position worth $20 million with duration of 1.

Answer: B

NEW QUESTION # 131
What do option deltas measure?

A. The sensitivity of the option value to changes risk free interest rate.
B. The sensitivity of the option value to the passage of time.
C. The rate of change of the option value with respect to changes in volatility of the underlying instrument.
D. The rate of change of the option value with respect to changes in the price of the underlying instrument.

Answer: D

Explanation:
Option delta () is a measure used in finance to indicate the sensitivity of an option's price to the price of the underlying asset. Specifically, it represents the rate of change of the option's value with respect to changes in the price of the underlying instrument. It is a fundamental concept in options trading and risk management.
References:
* Standard definition from options theory.

NEW QUESTION # 132
In its VaR calculations, JPMorgan Chase uses an expected tail-loss methodology which approximates losses at the 99% confidence level. This methodology consists of two subsequent steps to estimate the VaR. Which of the following explains this two-step methodology?

A. After VaR is computed at the 99% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.
B. After VaR is computed at the 97% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.
C. After VaR is computed at the 1% confidence level, the expected tail loss in excess of that confidence level is determined, which and is then compared with the VaR estimate at the 98% confidence level.
D. After VaR is computed at the 99% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 98% confidence level.

Answer: A

Explanation:
JPMorgan Chase's expected tail-loss methodology in VaR calculations involves:
* First, computing VaR at the 99% confidence level.
* Then, determining the expected tail loss in excess of that confidence level, which is then compared with the VaR estimate at the 99% confidence level.
This approach helps in understanding the potential extreme losses that might occur beyond the 99% confidence threshold.

NEW QUESTION # 133
......

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2016-FRR Braindumps Torrent Pass Certify| High Pass-Rate Reliable 2016-FRR Test Braindumps: Financial Risk and Regulation (FRR) Series

Reliable 2016-FRR Test Braindumps, Practice 2016-FRR Exam Pdf

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q128-Q133):

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