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Free 2016-FRR Exam Braindumps
Financial Risk and Regulation (FRR) Series Questions 11–15 (page: 24)

Updated On: 9-Feb-2026
Page 24 of 70
PDF with 387 Questions

Which one of the following four statements about equity indices is INCORRECT?

  1. Equity indices are numerical calculations that reflect the performance of hypothetical equity portfolios.
  2. Equity indices do not trade in cash form, rather, they are meant to track the overall performance of an equity market.
  3. Capitalization-weighted equity indices are not generally considered better to track the performance of an overall market.
  4. Price-weighted equity indices give greater weight to shares trading at high prices.

Answer(s): C



A large multinational bank is concerned that their duration measures may not be accurate since the yield curve shifts are not parallel.
Which of the following statements would be typically observed regarding variability of interest rates?

  1. Short-term rates are more variable than long-term rates.
  2. Short-term rates are less variable than long-term rates.
  3. Short-term rates are equally variable as long-term rates.
  4. Short-term rates and long-term rates always move in opposite directions.

Answer(s): A



Which one of the following four statements regarding commodity derivative risks is INCORRECT?

  1. Because of the different demand/supply balance in each region and the cost of transporting the oil between regions, a tanker of Brent crude oil in the UK will have a different value to a UK buyer than a tanker of Arab light crude oil in Singapore, which results in the basis risk.
  2. Calendar spreads represent a special case of basis risk and occur when the relative prices of commodity futures do not come in alignment and the trader becomes exposed to the absolute price movements.
  3. In most commodities, the longest term contracts are the most volatile, while the shortest term forward contract are the least volatile.
  4. Some commodities can be both in backwardation and a have a strong seasonal element.

Answer(s): C



To hedge equity exposure without buying or selling shares of stock or otherwise rebalancing the portfolio, a risk manager could initiate

  1. A short total return swap position.
  2. A long total return swap position.
  3. A short debt-for-equity swap.
  4. A long debt-for-equity swap.

Answer(s): A



A corporate bond was trading with 2%probability of default and 60% loss given default. Due to the credit crisis the probability of default increased to 10% and the loss given default increased to 100%. Assuming that the risk premium remained the same how did the credit spread change?

  1. Increased by 1120 basis points
  2. Increased by 880 basis points
  3. Increased by 1000 basis points
  4. Decreased by 880 basis points

Answer(s): B



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