Pass 2016-FRR Exam Guide

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 33

Which one of the four following statements describes a specific characteristic of risk and control self-assessments (RCSA) which distinguishes it from both control assessments and risk and control assessments?

Options:

RCSA is conducted by a third party, perhaps audit, compliance or the Sarbanes-Oxley team.

RCSA tests a control's effectiveness against set criteria and issues a pass/fail or level of effectiveness score.

RCSA is subjective by nature.

RCSA includes a risk assessment in addition to a control assessment.

Question 34

Which one of the following four examples would not be considered a typical source of market risk?

Options:

Unexpected changes in the term structure of interest rates.

The JPY depreciating against the USD.

Increased default rate on commercial mortgages due to higher interest rates.

Changes in the oil price due to the discovery of new oil fields.

Question 35

A risk manager has a long forward position of USD 1 million but the option portfolio decreases JPY 0.50 for every JPY 1 increase in his forward position. At first approximation, what is the overall result of the options positions?

Options:

The options positions hedge the forward position by 25%.

The option positions hedge the forward position by 50%.

The option positions hedge the forward position by 75%.

The option positions hedge the forward position by 100%.

Question 36

Which of the following statements about the interest rates and option prices is correct?

Options:

If rho is positive, rising interest rates increase option prices.

If rho is positive, rising interest rates decrease option prices.

As interest rates rise, all options will rise in value.

As interest rates fall, all options will rise in value.

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Financial Risk and Regulation (FRR) Series Questions and Answers

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