GARP 2016-FRR Exam (page: 13)
GARP Financial Risk and Regulation (FRR) Series
Updated on: 09-Feb-2026

Viewing Page 13 of 70

All of the four following exotic options are path-independent options, EXCEPT:

  1. Chooser options
  2. Power options
  3. Asian options
  4. Basket options

Answer(s): C



By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following outcomes EXCEPT:

  1. Aggressively courting of new business
  2. Lower probability of default
  3. Rapid growth
  4. Higher losses in case of default

Answer(s): B



Which one of the following changes would typically increase the price of a fixed income instrument, such as a bond?

  1. Decrease in inflation rates in a country.
  2. Increase in time to maturity.
  3. Increase in risk premium.
  4. Increase in demand for goods and services.

Answer(s): A



A financial analyst is trying to distinguish credit risk from market risk. A $100 loan collateralized with $200 in stock has limited ___, but an uncollateralized obligation issued by a large bank to pay an amount linked to the long-term performance of the Nikkei 225 Index that measures the performance of the leading Japanese stocks on the Tokyo Stock Exchange likely has more ___ than ___.

  1. Legal risk; market risk; credit risk
  2. Market risk; market risk; credit risk
  3. Market risk; credit risk; market risk
  4. Credit risk, legal risk; market risk

Answer(s): B



Which one of the following four statements correctly describes an American call option?

  1. An American call option gives the buyer of that call option the right to buy the underlying instrument on any date up to and including the expiry date.
  2. An American call option gives the buyer of that call option the right to sell the underlying instrument on any date up to and including the expiry date.
  3. An American call option gives the buyer of that call option the right to buy the underlying instrument on the expiry date.
  4. An American call option gives the buyer of that call option the right to sell the underlying instrument on the expiry date.

Answer(s): C



Viewing Page 13 of 70



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