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Free 2016-FRR Exam Braindumps
Financial Risk and Regulation (FRR) Series Questions 91–95 (page: 20)

Updated On: 9-Feb-2026
Page 20 of 70
PDF with 387 Questions

A risk manager is analyzing a call option on the GBP with a vega of 0.02.
When the perceived future volatility increases by 1%, the call option

  1. Increases in value by 0.02.
  2. Increases in value by 2.
  3. Decreases in value by 0.02.
  4. Decreases in value by 2.

Answer(s): A



A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have been made incorrectly.
When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.

  1. The marginal cost of funds provided.
  2. The overhead cost of maintaining the loan and the account.
  3. The inherent risk of lending to this borrower while providing a return on the risk capital used to the support the loan.
  4. The opportunity cost of risk-adjusted marginal cost of capital.

Answer(s): D



Which one of the following four statements regarding bank's exposure to credit and default risk is INCORRECT?

  1. The more the bank diversifies its credit portfolio, the better spread its credit risks become.
  2. In debt management, the value of any loan exposure will change typically in a fashion similar the same way that an equity investment can.
  3. In debt management, the goal is to minimize the effect of any defaults.
  4. Default risk cannot be hedged away fully, and it will always exist for the holder of the credit or for the person insuring against the credit or default event.

Answer(s): B



Changes to which one of the following four factors would typically not increase the cost of credit?

  1. Increasing inflation rates in a country.
  2. Increase in consumption of goods and services.
  3. Higher risk premium on a fixed income instrument.
  4. Higher return earned on alternative investments.

Answer(s): C



Which one of the following four statements about the relationship between exchange rates and option values is correct?

  1. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate decreases.
  2. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.
  3. As the dollar depreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.
  4. As the dollar appreciates relative to the pound, the right to sell dollars at a fixed pound exchange rate increases.

Answer(s): B



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