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GARP International Certificate in Banking Risk and Regulation (ICBRR) Sample Questions:
1. Which one of the following four mathematical option pricing models is used most widely for pricing European options?
A) The Black model
B) The Black-Scholes model
C) The Garman-Kohlhagen model
D) The Heston model
2. 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.
A) I, III
B) II, III
C) I, II, III
D) I
3. Which of the following factors would typically increase the credit spread?
I. Increase in the probability of default of the issuer.
II. Decrease in risk premium.
III. Decrease in loss given default of the issuer.
IV.
Increase in expected loss.
A) II and III
B) I and IV
C) I
D) I, II, and IV
4. A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for aquote to buy Brazilian reals in the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer and sells the real at this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange matched transaction. What is the impact of this transaction on the bank's risk profile?
A) This transaction eliminates operational risk.
B) This transaction eliminates counterparty risk.
C) This transaction eliminates credit risk.
D) This transaction eliminates market risk.
5. Which of the following statements regarding CDO-squared is correct?
I. CDO-squared use other CDOs and CMOs as collateral.
II. Risk assessment of CDO-squared is almost impossible due to their complexity.
III.
CDO-squared have lower credit risk than CMOs but higher than CDOs.
A) II and III
B) I, II, and III
C) I only
D) I and II
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: D | Question # 3 Answer: B | Question # 4 Answer: D | Question # 5 Answer: D |
By Myrna
