2022 2016-FRR dumps review – Professional Quiz Study Materials [Q146-Q170]

NO.146 From a risk point of view, which of the following factors will generally lead to the fluctuation of equity values
with industry P/E levels and a company’s individual earnings?
I. Sales
II. Cost management
III. Commercial success of the company
IV. Market sentiment

NO.147 Suppose that a regulator deems all corporate debt to have the same risk level. Which of the following behavior
of banks would be an example of regulatory arbitrage?

NO.148 Which one of the following four statements does identify correctly the relationship between the value of an
option and perceived exchange rate volatility?

NO.149 All of the following factors generally explain the equity bid-offer spread in a market EXCEPT:

NO.150 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

NO.151 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 interest rate should Alpha Bank charge
on the no-payment loan to Delta Industrial Machinery Corporation?

NO.152 Which of the following statements regarding bonds is correct?
I. Interest rates on bonds are typically stated on an annualized rate.
II. Bonds can pay floating coupons that are directly linked to various interest rate indices.
III. Convertible bonds have an element of prepayment risk.
IV. Callable bonds have an element of equity risk.

NO.153 According to the largest global poll of foreign exchange market participants, which one of the following four
global financial institutions was the most active participant in the global foreign exchange market?

NO.154 A customer of EtaBank, Alfred Fall, fell on the marble floors of the bank and sustained substantial injuries.
Subsequently, he won a personal injury claim of $50,000 against EtaBank. How should EtaBank’s operational
loss data event information database categorize this event?

NO.155 Gamma Bank is active in loan underwriting and securitization business, and given its collective credit
exposure, it will be typically most interested in the following types of portfolio credit risk:
I. Expected loss
II. Duration
III. Unexpected loss
IV. Factor sensitivities

NO.156 A trader inadvertently booked a trade with incorrect information. A subsequent market move resulted in a gain
to the bank. Should the bank include this amount of gain into its operational loss event data program?
I. The bank should include this gain in its operational loss event data program as a gain realized due to
operational risk events.
II. The bank should include this gain in its operational loss event data program as it indicates that a control
failed or a process is flawed.
III. The bank should include this event in its operational loss event data program and record the gain as a loss
resulting from operational risk.The bank should not include this event in its operational loss event data
program as it is not a loss event, but a market risk event.

NO.157 Which one of the following four statements about equity indices is INCORRECT?

NO.158 Which one of the following four options is NOT a typical component of a currency swap?

NO.159 Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with
another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As
prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while
the risk of loss to the other large bank will increase. By running the trades through a clearinghouse, the small
bank can achieve all of the following objectives EXCEPT:

NO.160 A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian
dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for a quote to buy Brazilian reals in
the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer and sells the reals at
this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange
matched transaction. What is the financial impact of this transaction for Alpha bank?

NO.161 A bank customer chooses a mortgage with low initial payments and payments that increase over time because
the customer knows that she will have trouble making payments in the early years of the loan. The bank makes
this type of mortgage with the same default assumptions uses for ordinary mortgages, thus underestimating the
risk of default and becoming exposed to:

NO.162 What is generally true of the relationship between a bond’s yield and it’s time to maturity when the yield curve
is upward sloping?

NO.163 To achieve leverage in long positions, a bank can use the following strategy:
I. Securities may be purchased with borrowed funds using a bank loan from the broker.
II. Securities may be borrowed on margin by taking a loan from a broker.
III. Securities may be purchased and used in a repo transaction to generate cash for further security purchases.
IV. The bank may enter into a derivative transaction, such as a total return swap, that requires little to no
collateral but mimics the performance of a long or short position in the underlying instrument.

NO.164 In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may
borrow up to ___ of the value of the securities from their brokers.

NO.165 BetaFin has decided to use the hybrid RCSA approach because it believes that it fits its operational
framework. Which of the following could be reasons to use the hybrid RCSA method?
I. BetaFin has previously created series of RCSA workshops, and the results of these workshops can be used to
design the questionnaires.
II. BetaFin believes that using the questionnaire approach should be more useful.
III. BetaFin had used the questionnaire approach successfully for certain businesses and the workshop
approach for others.
IV. BetaFin had already implemented a sophisticated RCSA IT-system.

NO.166 Operational risk team for a large international bank is implementing business continuity planning (BCP).
Which of the following BCP activities fall within the definition of operational risk and represent Basel II
Accord’s operational risk categories:
I. Damage to Physical Assets
II. Business Disruption and System Failures
III. Social Distancing Requirements
IV. Potential for Extreme Losses

NO.167 Financial regulators in a European country are considering banning trading in highly complex derivative
instruments that are not settled through a centralized clearinghouse. This ban can result in:
I. The value of the country’s currency dropping
II. Counterparties involved in trading of these derivative instruments failing to fulfill their obligations
III. The business model relying on these instruments failing
IV. Certain activities becoming illegal

NO.168 Which of the following statements presents an advantage of using risk and control self-assessments (RCSA) in
the operational risk framework?
I. RCSA provides very accurate scoring of risks and controls due to its subjective nature.
II. RCSA program provides insight into risks that exist in a firm, but that may or may not have occurred
before.
III. RCSA program can produce biased but transparent operational risk reporting.
IV. RCSA program allows each department to take ownership of its own risks and controls.

NO.169 Which one of the following four exotic option types has another option as its underlying asset, and as a result
of its construction is generally believed to be very difficult to model?

NO.170 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?