GARP 2016-FRR Exam With Confidence Using Practice Dumps

An operational risk policy should include:

The firm's definition of risk: Clearly defining what constitutes operational risk for the organization.

The governance of operational risk including who owns it, what it owns, and how issues should be escalated: Establishing roles and responsibilities for managing operational risk.

The main activities and elements that are managed by the operational risk function: Outlining the key processes and controls that are in place to manage operational risks.

Asian options are a type of option where the payoff depends on the average price of the underlying asset over a certain period.

This characteristic makes them suitable for consumers who want to hedge against price fluctuations over a period rather than at a single point in time.

For a natural gas consumer concerned with the average price over the course of a month, Asian options provide the necessary hedging mechanism.

From the bank's point of view, repricing the retail debt portfolio introduces risks primarily related to fluctuations in interest rates and bank spreads. When interest rates change, the cost of funds for the bank can fluctuate, which affects the interest margins (bank spreads). Additionally, the repricing of existing debt to match current market rates introduces direct exposure to interest rate volatility. Therefore, the risks associated with fluctuations in these areas are III. Interest rates and IV. Bank spreads.