Online Access Free 2016-FRR Exam Questions

Which one of the four following statements about drawdowns is correct?

• A.Drawdown estimates the effect on bank's liabilities when the bank's credit rating is cut.
• B.Drawdown measures the aggregate decline in market values of assets and positions due to a shock.
• C.Drawdown calculates significant losses in a particular business or a book.
• D.Drawdown quantifies the peak-to-trough decline of an investment over a known time period.

Returns on two assets show very strong positive linear relationship. Their correlation should be closest to which of the following choices?

• A.100%
• B.60%
• C.45%
• D.15%

Which one of the following statements is an advantage of using implied volatility as an input when calculating VaR?

• A.Current market data is used to determine implied volatilities, which makes them forward looking measures
• B.Implied volatilities are better at predicting actual volatilities
• C.Loss probabilities from the standard normal distribution are used to compute implied volatilities, which makes it easy to compute the.
• D.Implied volatility assumes volatilities are constant which makes it easy to implement in models.

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

• A.Profit and loss calculations are made by comparing the current values to the intrinsic values.
• B.For cash settled instrument the final market value is used to settle the transaction with the counterparty
• C.Counterparty credit risk calculations are made by analyzing the current values of all deals with the same counterparty.
• D.Margin call by futures exchanges are based on the current market value.

Nijenhaus Bruch is currently creating a program of operational loss data collection at a bank with a large branch network. Which minimal data standards should this collection approach include to meet minimum loss data collecting standards?

• A.Reports should capture the date of the event, the amount of loss, and recoveries of gross loss amounts.
• B.Reports should be designed to be shared with external data loss consortia recipients.
• C.Reports should capture both the date of the event and the amount of loss.
• D.Reports should only include the actual loss date.