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Free 2016-FRR Exam Braindumps
Financial Risk and Regulation (FRR) Series Questions 26–30 (page: 27)

Updated On: 9-Feb-2026
Page 27 of 70
PDF with 387 Questions

To estimate the forward price of oil, a commodity trader would most likely use the following pricing relationship:

  1. Oil forward price = Expected future oil price ± Oil market risk premium
  2. Oil forward price = Expected future oil price ± storage cost + Oil market risk premium
  3. Oil forward price = Expected future oil price ± Oil storage cost + (1 + Oil market risk premium)
  4. Oil forward price = Expected future oil price ± Oil storage cost + (1 - Oil market risk premium)

Answer(s): A



Over a long period of time DeltaBank has amassed a large equity option position.
Which of the following risks should be considered in this transaction?
I) Counterparty risk on long OTC option positions
II) Counterparty risk on short OTC option positions
III) Counterparty risk on long exchange-traded option positions
IV) Counterparty risk on short exchange-traded option positions

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

Answer(s): A



Which one of the following four statements best describes challenges of delta-normal method of mapping options positions?

Delta-normal method understates

  1. Risks of long and short positions for both calls and puts.
  2. Risks of long option positions for puts and overstates risks of short option positions for calls.
  3. Risks of long option positions for calls and overstates risks of short option positions for puts.
  4. Risks of short option positions and overstates risks of long option positions for both calls and puts.

Answer(s): D



James Arthur is a customer of a bank who has taken a floating rate loan from the bank. He is concerned that the rates may rise in the future increasing his payment amount.
Which of the following instruments should he buy to hedge against the rise in interest rates?

  1. Interest rate floor
  2. Interest rate cap
  3. Index amortizing swap
  4. Interest rate swap that receives fixed and pays floating

Answer(s): B



Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk is correct?

  1. Parametric methods generally assume returns are normally distributed, and non-parametric methods make no assumptions about return distributions.
  2. Parametric methods make no assumptions about return distributions, and non-parametric methods assume returns are normally distributed.
  3. Both parametric and nonparametric methods assume returns are normally distributed.
  4. Both parametric and nonparametric methods make no assumptions about return distributions.

Answer(s): A



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