GARP Financial Risk and Regulation (FRR) Series 2016-FRR Dumps in PDF

Free GARP 2016-FRR Real Questions (page: 6)

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

  1. If rho is positive, rising interest rates increase option prices.
  2. If rho is positive, rising interest rates decrease option prices.
  3. As interest rates rise, all options will rise in value.
  4. As interest rates fall, all options will rise in value.

Answer(s): A



To safeguard its capital and obtain insurance if the borrowers cannot repay their loans, Gamma Bank accepts financial collateral to manage its credit risk and mitigate the effect of the borrowers' defaults. Gamma Bank will typically accept all of the following instruments as financial collateral EXCEPT?

  1. Unrated bonds issued and traded on a recognized exchange
  2. Equities and convertible bonds included in a main market index
  3. Commercial debts owed to a company in a form of receivables
  4. Mutual fund shares and similar unit investment vehicles subject to daily quotes

Answer(s): C



Which one of the following four exotic option types has another option as its underlying asset, and as a result of its construction is generally believed to be very difficult to model?

  1. Spread options
  2. Chooser options
  3. Binary options
  4. Compound options

Answer(s): D



In the United States, Which one of the following four options represents the largest component of securitized debt?

  1. Education loans
  2. Credit card loans
  3. Real estate loans
  4. Lines of credit

Answer(s): C



A risk manager is considering how to best quantify option price dynamics using mathematical option pricing models.
Which of the following variables would most likely serve as an input in these models?
I) Implicit parameter estimate based on observed market prices
II) Estimates of sensitivity of option prices to parameter changes
III) Theoretical option determination based on assumptions

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

Answer(s): D



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