Online Access Free GARP.2016-FRR.v2022-05-06.q121 Practice Test (Page 8)

2016-FRR Exam Question 31

The skewness of ABC company's stock returns equal -1.5. What is the correct interpretation of this?

A.It indicates higher relative probability of negative returns compared to estimates derived from a normal
distribution.

B.It indicates lower probability of extreme negative events compared to the normal distribution.

C.It indicates that the returns are indeed normally distributed.

D.It indicates higher relative probability of extreme events than non-extreme events compared to estimates
from a normal distribution.

2016-FRR Exam Question 32

Alpha Bank estimates its 1-month, 95% VaR is 30 million EUR. This means that in the next month, there is a

A.95% chance that AlphaBank can lose more than 30 million EUR.

B.95% chance that AlphaBank can lose at most 30 million EUR.

C.95% chance that AlphaBank will at least lose 30 million EUR.

D.95% chance that AlphaBank will lose exactly 30 million EUR.

2016-FRR Exam Question 33

Which one of the four following statements about Basis point values is correct?
Basis point value:

A.Refers to the change in the value of a fixed income position for a very small change yields.

B.Provides a quick estimate of the sensitivity of the bank's banking book, to increasing volatility in interest
rates.

C.Is a widely used statistical tool used to measure market risk.

D.Is a risk sensitivity measure used to measure the point spread risk in the banking book.

2016-FRR Exam Question 34

In hedging transactions, derivatives typically have the following advantages over cash instruments:
I. Lower credit risk
II. Lower funding requirements
III. Lower dealing costs
IV. Lower capital charges

A.I, III

B.I, II, III, IV

C.I, II

D.II, IV

2016-FRR Exam Question 35

Which one of the following four statements correctly defines chooser options?

A.These options pay an amount equal to the power of the value of the underlying asset above the strike
price.

B.The owner of these options decides if the option is a call or put option only when a predetermined date
is reached.

C.These options represent a variation of the plain vanilla option where the underlying asset is a basket of
currencies.

D.These options give the holder the right to exchange one asset for another.

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