GARP 2016-FRR Exam (page: 5)
GARP Financial Risk and Regulation (FRR) Series
Updated on: 09-Feb-2026

Viewing Page 5 of 70

According to the largest global poll of foreign exchange market participants, which one of the following four global financial institutions was the most active participant in the global foreign exchange market?

  1. Citibank
  2. UBS AG
  3. Deutsche Bank
  4. Barclays Capital

Answer(s): C



Which one of the following four statements regarding counterparty credit risk is INCORRECT?

  1. Counterparty credit risk refers to the inability to realize gains in a contract with a counterparty due to its default.
  2. The exposure at default is variable due to fluctuations in swap valuations.
  3. The exposure at default can be negatively correlated to probability of default.
  4. Dynamic collateral provisions often increase counterparty risk considerably.

Answer(s): B



Which one of the following statements about futures contracts is correct?
I) Futures contracts are subject to the same risks as the underlying instruments.
II) Futures contracts have additional interest rate risk die to the future delivery date.
III) Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.

  1. I
  2. I, III
  3. II, III
  4. I, II, III

Answer(s): A



A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?

  1. His overall portfolio has the same exposure to USD as a portfolio that is long USD 5 million.
  2. His overall portfolio has the same exposure to USD as a portfolio that is long USD 10 million.
  3. His overall portfolio has the same exposure to USD as a portfolio that is short USD 5 million.
  4. His overall portfolio has the same exposure to USD as a portfolio that is short USD 10 million.

Answer(s): A



A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off based on the average price of the underlying asset on either a few specific chosen dates or all dates within a specific pricing window.
Which one of the following four option types would most likely meet these specific foreign currency demands?

  1. American options
  2. European options
  3. Asian options
  4. Chooser options

Answer(s): C



Viewing Page 5 of 70



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