GARP International Certificate in Banking Risk and Regulation (ICBRR) - ICBRR Exam Practice Test
A hedge fund trader buys options to establish an exposure in the currency market, thereby effectively removing the risk of being able to participate in a gapping market. In this case the options premium represents the price paid for eliminating the execution risk of
Correct Answer: B
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How could a bank's hedging activities with futures contracts expose it to liquidity risk?
Correct Answer: A
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Bank Alpha is making a decision about lending 10-year loans in a sector that is fairly illiquid and is looking at various options to fund the loans. Which of the following options to fund the loans exhibits the most exogenous liquidity risk?
Correct Answer: D
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To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:
Correct Answer: D
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All of the four following exotic options are path-independent options, EXCEPT:
Correct Answer: C
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AlphaBank's management is evaluating how changes in its business environment could materially impact risk categories. As a result, bank's management decides to implement the structure, which facilitates the discussion in an integrative context, spanning market, credit, and operational risk factors, and encourages transparency and communication between risk disciplines. Which one of the following four approaches should the management choose to achieve this strategic goal?
Correct Answer: B
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Which one of the following four features is NOT a typical characteristic of futures contracts?
Correct Answer: A
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Which one of the following four statements on factors affecting the value of options is correct?
Correct Answer: D
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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?
Correct Answer: C
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Why do regulatory standards impose formulaic capital calculations for all of the banks activities?
I. If the banks use different models it is difficult for a regulator to compare results across banks.
II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in their calculations.
III.
By imposing standardized calculations regulators can make sure that banks do not use capital calculations to game the banking regulation system.
I. If the banks use different models it is difficult for a regulator to compare results across banks.
II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in their calculations.
III.
By imposing standardized calculations regulators can make sure that banks do not use capital calculations to game the banking regulation system.
Correct Answer: D
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Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's expected loss be?
Correct Answer: D
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Which one of the following four examples would not be considered a typical source of market risk?
Correct Answer: A
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