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The FRR Series Certification Exam offered by GARP is a comprehensive and rigorous assessment of the skills and knowledge required to effectively manage financial risks. Financial Risk and Regulation (FRR) Series certification is globally recognized and respected in the industry, providing professionals with a valuable asset for career advancement. With the increasing importance of risk management in the financial industry, obtaining the FRR Series Certification is a wise investment in one's career.

The Global Association of Risk Professionals (GARP) is a non-profit organization that aims to provide a platform for professionals in the risk management and financial industries to network, learn, and advance their careers. One of GARP's key initiatives is the Financial Risk and Regulation (FRR) Series, which offers a range of certification exams designed to validate and enhance the skills of risk professionals. The GARP 2016-FRR Certification Exam is one of the most popular exams in the FRR Series.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q384-Q389):

NEW QUESTION # 384
Which statements correctly describe the features of using subscription databases for operational loss data analysis?
Subscription databases
I. Provide central data repositories and benchmarking services to their members.
II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.
III. Assist with mapping the events to the appropriate business lines, risk categories and causes.
IV. Reflect only events that are interesting to the press and are reported in the press.

A. I, II and III
B. I and II
C. II and III
D. II, III, and IV

Answer: A

Explanation:
* Statement I:Subscription databases provide central data repositories and benchmarking services to their members.
* Verified and correct. These databases aggregate data from multiple sources to provide valuable benchmarking information.
* Statement II:Subscription databases can provide insight into whether the losses in a firm reflect the usual losses in their industry.
* Verified and correct. By comparing a firm's losses with industry data, firms can identify trends and anomalies.
* Statement III:Subscription databases assist with mapping the events to the appropriate business lines, risk categories, and causes.
* Verified and correct. Proper mapping helps in accurate risk assessment and management.
* Statement IV:Subscription databases reflect only events that are interesting to the press and are reported in the press.
* Incorrect. These databases aim to capture a wide range of operational loss events, not just those reported in the press.

NEW QUESTION # 385
Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?

A. Credit Risk only
B. Interest rate risk and credit risk
C. Interest rate risk only
D. The bank does not incur any risk since the loan is not yet originated

Answer: B

Explanation:
When a bank has loans in the "pipeline," it means these loans are in the process of origination but have not yet been originated. During this period, the bank is exposed to both interest rate risk and credit risk.
* Interest Rate Risk: This risk arises because changes in interest rates can affect the bank's profitability on these loans. If interest rates change unfavorably between the time the loan terms are set and the time the loan is actually issued, the bank might end up earning less than expected. This is particularly relevant in a volatile interest rate environment.
* Credit Risk: Even though the loans are not yet originated, the bank assesses the creditworthiness of the potential borrowers during the pipeline stage. If the financial condition of a borrower deteriorates before the loan is finalized, the bank faces the risk of having to deal with a higher probability of default.
These risks are inherent to the loan origination process and are present even before the loan is officially on the bank's books.

NEW QUESTION # 386
Which of the activities represent examples of market manipulation?

A. Short squeeze
B. Stop-loss order
C. Market gap
D. Crowded trades

Answer: A

NEW QUESTION # 387
What is a common implicit assumption that is made when computing VaR using parametric methods?

A. The expected returns are constant, but the standard deviation changes over time.
B. The standard deviations of returns are constant, but the mean changes over time.
C. The mean and standard deviation of returns change periodically in response to crises.
D. The mean of and the standard deviations of returns are both constant.

Answer: D

Explanation:
When computing VaR using parametric methods, a common implicit assumption is that both the mean and standard deviation of returns are constant over time.
* Constant Mean: The expected return of the asset or portfolio does not change over the time period considered.
* Constant Standard Deviation: The volatility of returns, which measures the dispersion of returns from the mean, is assumed to be constant.
This assumption simplifies the calculations as it allows the use of historical data to estimate future risks.
However, it may not always hold true in real-world scenarios where markets can exhibit changing volatility and return patterns.
References
* How Finance Works.pdf, p. 201

NEW QUESTION # 388
A governance, risk, and compliance strategy can help a bank to avoid:
I. Incomplete analysis of risks
II. Misperception of risk exposures
III. Duplication of effort
IV. Contradictory reporting

A. I, II, III, and IV
B. II, III, and IV only
C. I and II only
D. III and IV only

Answer: A

Explanation:
Comprehensive and Detailed In-Depth Explanation:
A Governance, Risk, and Compliance (GRC) strategy integrates risk management, regulatory compliance, and governance to enhance decision-making and operational efficiency. It helps a bank avoid:
* I:Incomplete risk analysis by ensuring comprehensive risk identification processes.
* II:Misperception of exposures by providing consistent risk assessment frameworks.
* III:Duplication of effort by streamlining risk and compliance activities across units.
Reference:BCBS, "Basel II: International Convergence of Capital Measurement and Capital Standards," June
2006, para. 721-723; GARP FRR Study Notes, Risk Governance Section.

NEW QUESTION # 389
......

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Leo Ward Leo Ward

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