International Certificate in Banking Risk and Regulation (ICBRR) (ICBRR) Free Practice Test

Question 1

Company A needs to provide a risk probability/frequency score for its RCSA program. If the event is likely to happen once in 2 years, then the frequency score will be equal to:

A. 0.2

B. 1

C. 2

D. 0.5

Correct Answer: D

Question 2

The data available to estimate the statistical distribution of bank losses is difficult to assemble for which of the following reasons?
I. The needed data is vast in quantity.
II. The data requires bringing together significantly different measures of risk.
III.
Some risks are difficult to quantify and hence the data might involve subjective elements.

A. I, III

B. I, II, III

C. II, III

D. I, II

Correct Answer: C

Question 3

Which one of the four following statements regarding foreign exchange (FX) swap transactions is INCORRECT?

A. FX swap generates more exchange rate risk than simple forward transactions.

B. FX swap is normally used for hedging various currency positions.

C. FX swap is a common short-term transaction.

D. FX swap is generally used to for funding foreign currency balances and currency speculation.

Correct Answer: A

Question 4

An associate from the finance group has been identified as an operational risk coordinator (ORC) for her department. To fulfill her ORC responsibilities the associate will need to:
I. Provide main communication contact with operational risk department
II. Provide main reporting contact with audit department
III. Coordinate collection of key risk indicators in her area
IV.
Coordinate training and awareness activities in her area

A. I, II, III

B. I, III, IV

C. II, III, IV

D. I, II

Correct Answer: B

Question 5

What is a common implicit assumption that is made when computing VaR using parametric methods?

A. The mean of and the standard deviations of returns are both constant.

B. The expected returns are constant, but the standard deviation changes over time.

C. The mean and standard deviation of returns change periodically in response to crises.

D. The standard deviations of returns are constant, but the mean changes over time.

Correct Answer: A

Question 6

Which one of the following four statements regarding the current value of a transaction and its purposes is INCORRECT?

A. Margin call by futures exchanges are based on the current market value.

B. Profit and loss calculations are made by comparing the current values to the intrinsic values.

C. Counterparty credit risk calculations are made by analyzing the current values of all deals with the same counterparty.

D. For cash settled instrument the final market value is used to settle the transaction with the counterparty

Correct Answer: B

Question 7

Which one of the following four statements regarding floating rate bonds is incorrect?

A. Floating rate bonds typically have less price risk than fixed rate bonds.

B. Floating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.

C. Floating rate bonds are very sensitive to changes in interest rates.

D. Floating rate bonds only have a small degree of interest rate risk.

Correct Answer: C

Question 8

What is the role of market risk management function within a bank?
I. Control and minimize the risks the bank should take.
II. Establish a comprehensive market risk policy framework.
III. Define, approve and monitor risk limits.
IV.
Perform stress tests and other qualitative risk assessments.

A. I, II and III

B. I and III

C. II and IV

D. II, III, and IV

Correct Answer: D

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GARP International Certificate in Banking Risk and Regulation (ICBRR) (ICBRR) Free Practice Test