Get Jan-2026 updated 2016-FRR Certification Exam Sample Questions [Q27-Q41]

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Get Jan-2026 updated 2016-FRR Certification Exam Sample Questions

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The Global Association of Risk Professionals (GARP) offers the Financial Risk and Regulation (FRR) Series Certification Exam to individuals who have an interest in risk management and regulation within the financial industry. The FRR Series exam is designed to evaluate an individual’s understanding of financial risk management and regulatory compliance as they relate to financial institutions. 2016-FRR exam covers topics such as market, credit, operational, and liquidity risk, as well as regulatory frameworks and guidelines.

NEW QUESTION 27
Samuel Teng owns a portfolio of bonds and is trying to compute the convexity of his portfolio. Which of the
following choices equals the convexity of Samuel’s portfolio?

Minimum of the convexities of the component bonds

Value-weighted average convexity of the component bonds

Coupon-weighted average convexity of the component bonds

Maximum of the convexities of the component bonds

NEW QUESTION 28
Bank Alpha is making a decision about lending 10-year loans in a sector that is fairly illiquid and is looking at
various options to fund the loans. Which of the following options to fund the loans exhibits the most
exogenous liquidity risk?

Overnight interbank markets

The 6-month LIBOR markets

The 1-year treasury markets

Foreign exchange markets

NEW QUESTION 29
A risk associate responsible for the operational risk function wants to evaluate the upward reporting governance structure and to assess its critical features. Which one of the four attributes does not represent a critical feature of the upward reporting governance structure?

Independence

Importance

Relevance

Security

NEW QUESTION 30
A credit portfolio manager analyzes a large retail credit portfolio. Which of the following factors will represent
typical disadvantages of market-linked credit risk drivers?
I. Need to supply a large number of input parameters to the model
II. Slow computation speed due to higher simulation complexity
III. Non-linear nature of the model applicable to a specific type of credit portfolios
IV. Need to estimate a large number of unknown variable and use approximations

I, II

II, III

III, IV

NEW QUESTION 31
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:

Eliminating the collateral requirement

Protecting itself against increases in future collateral demands

Protecting against the risk of the failure of one of the large banks

Mitigating option hedging risks and altering margin requirement

NEW QUESTION 32
Under Basel III, the Comprehensive Risk Measure is an incremental charge for what kind of trading portfolio?

Correlation trading

Options trading

Swaps trading

Covariance trading

NEW QUESTION 33
Which one of the following four statements correctly defines an option’s delta?

Delta measures the expected decline in option with time and is usually expressed in years.

Delta measures the effect of 1 bp in interest rate change on the option price.

Delta is the multiplier that best approximates the short-term change in the value of an option.

Delta measures the impact of volatility on the price of an option.

NEW QUESTION 34
To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:

Credit VaR

Expected loss

Unexpected loss

Factor sensitivity

NEW QUESTION 35
Which one of the following four statements regarding commodity exchanges is INCORRECT?

Banks have no natural direct exposure to commodities.

Banks trade in OTC contracts primarily to serve clients and facilitate client hedging and lending.

Customers rarely trade physical commodities with banks.

Commodity markets are mot liquid than debt markets.

NEW QUESTION 36
Which one of the following statements regarding collateralized mortgage obligations (CMO) is incorrect?

CMOs have senior tranches which are considered short-term, low-risk instruments by banks

CMOs are asset-backed securities that have pools of collateralized debt obligations (CDOs) as underlying collateral.

CMOs are generally less risky investment than CDOs.

CMOs are pools of mortgages that are divided according to the timing of cash flows.

NEW QUESTION 37
To estimate the forward price of oil, a commodity trader would most likely use the following pricing relationship:

Oil forward price = Expected future oil price ± Oil market risk premium

Oil forward price = Expected future oil price ± storage cost + Oil market risk premium

Oil forward price = Expected future oil price ± Oil storage cost + (1 + Oil market risk premium)

Oil forward price = Expected future oil price ± Oil storage cost + (1 – Oil market risk premium)

NEW QUESTION 38
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?

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.

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.

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.

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.

NEW QUESTION 39
Which one of the following four statements correctly defines an option’s delta?

Delta measures the expected decline in option with time and is usually expressed in years.

Delta measures the effect of 1 bp in interest rate change on the option price.

Delta is the multiplier that best approximates the short-term change in the value of an option.

Delta measures the impact of volatility on the price of an option.

NEW QUESTION 40
A large multinational bank is concerned that their duration measures may not be accurate since the yield curve
shifts are not parallel. Which of the following statements would be typically observed regarding variability of
interest rates?

Short-term rates are more variable than long-term rates.

Short-term rates are less variable than long-term rates.

Short-term rates are equally variable as long-term rates.

Short-term rates and long-term rates always move in opposite directions.

NEW QUESTION 41
Which one of the following four global markets for financial assets or instruments is widely believed to be the
most liquid?

Equity market.

Foreign exchange market.

Fixed income market

Commodities market

GARP 2016-FRR (Financial Risk and Regulation) Series Certification Exam is a globally recognized certification program aimed at financial risk and regulation professionals. 2016-FRR exam is designed to test the knowledge and skills of candidates in the areas of financial risk management, regulatory compliance, and governance.

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Get Jan-2026 updated 2016-FRR Certification Exam Sample Questions [Q27-Q41]

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