FRM Part 1 Practice Questions — All Questions
AllFoundations of Risk ManagementQuantitative AnalysisFinancial Markets & ProductsValuation & Risk ModelsCredit & Operational Risk
4 questions
Financial Markets & Products
A call option gives the holder the right to:
- a.Sell the underlying at the strike
- b.Default without penalty
- c.Receive fixed coupons
- d.Buy the underlying at the strike✓
A call is the right (not obligation) to buy the underlying at the strike price.
Financial Markets & Products
A key difference between futures and forwards is that futures are:
- a.Options, not obligations
- b.Exchange-traded and marked to market daily✓
- c.Always customized and unregulated
- d.Never settled
Futures are standardized, exchange-traded, and marked to market daily; forwards are OTC.
Financial Markets & Products
An interest-rate swap typically exchanges:
- a.Two stocks
- b.Fixed for floating interest payments✓
- c.Two currencies' principal only
- d.Commodities for bonds
A plain-vanilla interest-rate swap exchanges fixed-rate for floating-rate payments.
Financial Markets & Products
Using derivatives to reduce an existing exposure is called:
- a.Arbitraging
- b.Speculating
- c.Leveraging
- d.Hedging✓
Hedging uses derivatives to offset an existing risk exposure.