FRM Exam Questions with Complete Solutions 100% Verified| Latest Update Graded A+
What are derivatives? Instruments designed to manage financial risks efficiently.
What is a derivatives contract? A private contract deriving its value from some underlying
asset price, reference rate, or index. They are private agreements between two parties.
What makes a derivative position different than a cash position Derivative positions are
leveraged making it an efficient instrument for hedging and speculation owing to low
transaction costs, but more difficult to assess the potential downside risk.
What is Financial engineering The development and creative application of financial
technology to solve financial problems and exploit financial opportunities.
Why are Notional amounts highly misleading? Notional amounts do not describe market
risks. Actual market risk is far less than outstanding Notional amounts, since much of the
notional amount reflects hedging activity against other positions including cash market risk.
What is Finanical Risk Management? The design and implentation of procedures for
identifying, measuring and managing financial risks.
What is VAR? Var is a statistical risk measure of potential losses. Var summarizes the worst
loss over a target horizon that will not be exceeded with a given level of confidence. Var
accounts for leverage and diversification effects.
What is a frequency distribution? A count of how many occurance have been observed
within a particular range.
Market Risk The risk of losses owing to movements in the level or volatility of market prices.
What are derivatives? Instruments designed to manage financial risks efficiently.
What is a derivatives contract? A private contract deriving its value from some underlying
asset price, reference rate, or index. They are private agreements between two parties.
What makes a derivative position different than a cash position Derivative positions are
leveraged making it an efficient instrument for hedging and speculation owing to low
transaction costs, but more difficult to assess the potential downside risk.
What is Financial engineering The development and creative application of financial
technology to solve financial problems and exploit financial opportunities.
Why are Notional amounts highly misleading? Notional amounts do not describe market
risks. Actual market risk is far less than outstanding Notional amounts, since much of the
notional amount reflects hedging activity against other positions including cash market risk.
What is Finanical Risk Management? The design and implentation of procedures for
identifying, measuring and managing financial risks.
What is VAR? Var is a statistical risk measure of potential losses. Var summarizes the worst
loss over a target horizon that will not be exceeded with a given level of confidence. Var
accounts for leverage and diversification effects.
What is a frequency distribution? A count of how many occurance have been observed
within a particular range.
Market Risk The risk of losses owing to movements in the level or volatility of market prices.
