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The FRR Series consists of two levels of certification: the FRM (Financial Risk Manager) and the ERP (Energy Risk Professional). The FRM certification focuses on financial risk management in banking, insurance, and asset management, while the ERP certification is geared towards professionals working in the energy industry. Both certifications require passing two exams, and candidates must have a certain amount of relevant work experience to be eligible to take the exams.

GARP 2016-FRR Exam is a rigorous and challenging certification that is highly regarded within the financial risk industry. 2016-FRR Exam covers a range of topics that are essential for financial risk professionals, and passing it demonstrates a commitment to ongoing learning and professional development. With the support of GARP's study materials and professional community, candidates can prepare themselves to be confident and competent in managing financial risk in their organizations.

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The Global Association of Risk Professionals (GARP) is a non-profit organization that aims to enhance the knowledge and skills of risk professionals worldwide. One of the ways in which GARP achieves this goal is through its certification programs. One of the most popular and well-respected certifications offered by GARP is the Financial Risk and Regulation (FRR) Series.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q168-Q173):

NEW QUESTION # 168
In order to comply with key risk indicator (KRI) standards, a data analyst will set the following criteria for each indicator except:

A. Red flag threshold
B. Method of calculation
C. Method of reporting
D. Owner of the KRI

Answer: A

Explanation:
Comprehensive and Detailed In-Depth Explanation:
Key Risk Indicators (KRIs) are metrics used to monitor operational, credit, or market risks, providing early warnings of potential issues. Basel II's operational risk framework and GARP's FRR guidelines specify that KRIs require:
* Method of calculation:Defines how the KRI is computed (e.g., number of failed transactions).
* Owner of the KRI:Assigns responsibility for monitoring and acting on the indicator.
* Method of reporting:Specifies how and to whom the KRI is communicated (e.g., dashboards).
* Red flag threshold:While critical for actionability, it is an outcome of KRI design, not a mandatory criterion for compliance with KRI standards. Thresholds vary by institution and risk appetite, making C the exception.Options A, B, and D are foundational to KRI establishment, whereas C is a subsequent application.
Exact Extract from Official Source:
* BCBS, "Basel II: International Convergence of Capital Measurement and Capital Standards," June
2006, para. 664: "A bank's operational risk measurement system must include the use of key risk indicators... These should include clear definitions, ownership, and reporting mechanisms, tailored to the bank's risk profile."
* GARP FRR Study Notes, Operational Risk Section: "KRIs require a calculation methodology, an assigned owner, and a reporting structure. Thresholds, such as red flags, are set based on risk tolerance but are not a universal requirement for KRI definition." Reference:BCBS, "Basel II," para.664-665; GARP FRR Study Notes, Operational Risk Section.

NEW QUESTION # 169
Interest rate swaps are:

A. Exchange traded derivative contracts that allow banks to take positions in future interest rates.
B. OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term interest rates without relying on long-term funding.
C. OTC derivative contracts that allow banks to take positions in series of future exchange rates.
D. Exchange traded derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term interest rates without having to use long-term funding.

Answer: B

Explanation:
Interest rate swaps are over-the-counter (OTC) derivative contracts. They are designed to help banks and customers manage their interest rate exposure without the need to use long-term funding. In an interest rate swap, two parties exchange cash flows from interest rate payments, typically one fixed and one floating rate, based on a notional principal amount. This allows institutions to benefit from the risk/reward profile of long-term interest rates, enabling them to manage their exposure to interest rate fluctuations efficiently.

NEW QUESTION # 170
For two variables, which of the following is equal to the average product of the deviations from their
respective means?

A. Standard deviation
B. Covariance
C. Correlation
D. Kurtosis

Answer: B

NEW QUESTION # 171
Gamma Bank is active in loan underwriting and securitization business, and given its collective credit exposure, it will be typically most interested in the following types of portfolio credit risk:
I. Expected loss
II. Duration
III. Unexpected loss
IV. Factor sensitivities

A. I, III, IV
B. I
C. II
D. I, III

Answer: D

Explanation:
Gamma Bank, active in loan underwriting and securitization, would typically be most interested in:
* Expected Loss: The anticipated average loss from defaults in the credit portfolio.
* Unexpected Loss: The potential variability or deviation from the expected loss, critical for understanding the risk beyond average expectations.
Duration and factor sensitivities are more relevant to market risk rather than direct credit risk.
References
* Verified information from the document

NEW QUESTION # 172
Which one of the four following activities is NOT a component of the daily VaR computing process?

A. Updating individual risk factor models.
B. Producing the VaR report.
C. Updating factor interrelationships.
D. Computing portfolio risk by delta-normal or delta-gamma method.

Answer: C

Explanation:
The daily VaR (Value at Risk) computing process typically involves several key steps, including updating individual risk factor models, computing portfolio risk (often using methods like delta-normal or delta-gamma), and producing the VaR report. Updating factor interrelationships, which involves recalibrating how different risk factors correlate or interact with each other, is not necessarily a daily requirement and is usually performed less frequently as part of broader risk model adjustments. Therefore, updating factor interrelationships is not a core component of the daily VaR computation process.

NEW QUESTION # 173
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