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Mock Exam D
FRM 2012 Practice Questions
Table of Contents
Question 1: On- and off-balance-sheet foreign exchange (FX) risk hedges ..................... 3
Question 2: Capital asset pricing model (CAPM) .................................................... 3
Question 3: EWMA covariance ......................................................................... 3
Question 4: Collateralization in over-the-counter (OTC) market ................................. 4
Question 5: Role of rating agencies in financial markets .......................................... 4
Question 6: Geometric Brownian motion (GBM) Monte Carlo simulation ........................ 4
Question 7: Chase Manhattan Bank/Drysdale Securities ........................................... 5
Question 8: Arbitrage pricing model (APT) .......................................................... 5
Question 9: Eurodollar futures and duration-based hedges ....................................... 5
Question 10: Limitations of Value-at-Risk (VaR). Coherent Risk Measures. ..................... 5
Question 11: Chi-square distribution ................................................................. 6
Question 12: Basis risk .................................................................................. 6
Question 13: Spectral risk measures .................................................................. 6
Question 14: Hypothesis testing (Stock & Watson) ................................................. 7
Question 15: Currency swap valuation ............................................................... 7
Question 16: Tax argument for risk management .................................................. 8
Question 17: Black-Scholes with dividends .......................................................... 8
Question 18: American option lower bounds ........................................................ 9
Question 19: Dynamic delta hedging ................................................................. 9
Question 20: Bond price using spot rates ............................................................ 9
Question 21: Difference between two means ..................................................... 10
Question 22: Commodity lease rates ............................................................... 10
Question 23: Expected loss (M. Ong) ............................................................... 10
Question 24: Bond maturity and retirement ....................................................... 11
Question 25: Dollar value of an '01 (DV01; aka, DVBP, PV01) ................................... 11
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Question #
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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Answer A
Answer B
Answer C
Answer D
6.0%
8.8%
11.2%
12.0%
0.38
0.40
0.44
0.46
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