GARP 2016-FRR Exam Topics
GARP 2016-FRR Exam Overview :
| Exam Name: | Financial Risk and Regulation (FRR) Series |
| Exam Code: | 2016-FRR |
| Certifications: | GARP Financial Risk and Regulation Certification |
| Actual Exam Duration: | 120 minutes |
| Expected no. of Questions in Actual Exam: | 80 |
| See Expected Questions: | GARP 2016-FRR Expected Questions in Actual Exam |
GARP 2016-FRR Exam Objectives :
| Section | Weight | Objectives |
|---|---|---|
| Credit Risk Management | 25% | CHAPTER 1. CREDIT RISK ASSESSMENT After completing this reading, you should be able to: • Differentiate between credit and market risk • Estimate expected credit losses • Understand the mission and objectives of the credit portfolio • Interpret lending guidelines • Explain the relationship between credit risk and loan pricing • Interpret inputs to credit models • Explain the meaning of the probability of default (PD) • Differentiate exposure at default (EAD) for loans versus derivative contracts • Compute the recovery rate and loss given default (LGD) for an obligor CHAPTER 2. THE RISKS OF CREDIT PRODUCTS After completing this reading, you should be able to: • Explain features of credit products • Understand consumer credit risk • Understand the purpose of consumer credit scoring • Describe sensible credit score factors • Design credit scorecards for the SME sector • Explain credit scoring benefits • Analyze corporate credit risk models • Explain how counterparty credit differs from corporate credit • Calculate a simple credit valuation adjustment (CVA) measure • Explain elements of sovereign credit risk • Illustrate the relationship between sovereign ratings and corporate ratings • Assess the regulatory treatment of sovereign exposures CHAPTER 3. CREDIT RISK PORTFOLIO MANAGEMENT After completing this reading, you should be able to: • Describe the evolution of credit risk management • Understand the purpose of correlation in credit analysis • Examine the risk management of a credit portfolio • Illustrate the elements of asset securitization • Explain how credit derivatives work • Describe the purpose and structure of CDS indices • Explain elements of how collateral works • Provide an overview of credit portfolio management models • Describe potential problems with credit portfolio models • Assess the purpose of asset management companies or bad banks • Describe methods used to avoid bad loans • Describe a broad range of credit risk reports and their purpose • Estimate recovery rates on problem assets • Define the benefits of external credit and loan review • Investigate the elements of a stress test CHAPTER 4. THE REGULATORY VIEW OF CREDIT RISK After completing this reading, you should be able to: • Understand the link between capital and credit risk • Identify the shortcomings of and criticize Basel I • Explain elements of the Basel II framework • Explain the elements of the Basel III framework • Describe the standardised approach (SA) for credit risk • Describe the Internal Ratings Based (IRB) for credit risk • Explain why Basel III contains a revised standardised approach for credit risk • Explain the need to revise the Basel III IRB approaches • Identify key elements of the Basel III securitization framework • Investigate the link between stress testing and regulatory capital • Differentiate between EL and UL models • Discuss methods for credit risk mitigation • Describe the standardised approach (SA) for counterparty credit risk (CCR) • Differentiate between SA and IMM for CCR • Explain the features and risks of leveraged lending • Describe different types of stress testing |
| Market Risk Management | 25% | The readings that you should focus on for this section and the specific learning objectives that should be achieved with each reading are: CHAPTER 1. INTRODUCTION TO MARKET RISK MANAGEMENT After completing this reading, you should be able to: • Provide a definition of market risk • Illustrate implied volatility price risk • Interpret implied correlation risk • Describe what impact the Basel III finalization has had on market risk management CHAPTER 2. FOREIGN EXCHANGE MARKETS, INSTRUMENTS, AND RISKS After completing this reading, you should be able to: • Explain the drivers of foreign exchange rates • Calculate a cross-currency spot contract price • Calculate a currency forward contract price • Outline the market risks in foreign exchange forwards • Describe the differences between currency forward and futures • Explain the features and benefits of derivative contracts • Describe the elements of a currency swap • Explain option market pricing dynamics • Evaluate the risks in option trading • Identify exotic options variants • Deduce the risks in trading exotic options CHAPTER 3. INTEREST RATE MARKETS, INSTRUMENTS, AND RISKS After completing this reading, you should be able to: • Describe rate setting standards for loans and deposits in the interbank market • Explain interest rate spreads for loans and bonds • Distinguish between major bond classifications • Compute prices for cash fixed income instruments • Relate theories of the term structure of interest rates to pricing dynamics in the market • Compare the impact of major drivers of interest rates • Understand drivers of credit spreads • Calculate the present value of a basis point (PVBP/PV01) for a bond • Compute modified duration and Macaulay duration • Describe the effects of convexity in a fixed income position • Explain the difference between forward rate agreements and short-term interest rate futures • Determine how interest rate swaps are valued and describe their risks • Describe the structure and pricing of currency swaps • Identify fixed income options and exotic instruments CHAPTER 4. EQUITY AND COMMODITY MARKETS, INSTRUMENTS, AND RISKS After completing this reading, you should be able to: • Explain the features and value drivers in equity instruments • Understand the pricing of equity forwards and futures contracts • Explain the elements of equity index and total return swaps • Compare equity index futures to balanced equity portfolios • Identify the main features of equity options • Assess the main physical commodity risk drivers • Understand commodity derivative risks • Analyze the main credit derivative instruments CHAPTER 5. THE RISK MEASUREMENT PROCESS After completing this reading, you should be able to: • Provide an accurate definition of VaR • Estimate parametric VaR using the normal distribution • Describe how VaR can be estimated from historical data • Understand how VaR can be calculated with Monte Carlo simulation • Identify the Main VaR shortcomings • Assess VaR for multiple factors • Describe how option positions are converted for VaR estimation • Describe the daily VaR process • Explain how expected shortfall (ES) can be a solution to the VaR model coherence problem • Define the purpose of stressed VaR • Evaluate the significance of the Basel incremental risk charge (IRC) • Describe the Basel comprehensive risk measure (CRM) • Examine the robustness of credit valuation adjustment (CVA) as a risk quantification method • Identify the minimum Basel capital requirements for market risk CHAPTER 6. RISKS IN BANK TRADING STRATEGIES After completing this reading, you should be able to: • Describe position management and hedging • Explain risks in leveraged trading • Identify the risks in carry trades • Explain risk dynamics in financial markets • Assess the relative magnitude of risks in basis trading • Evaluate the consequences of failure of trading controls • Describe the problems with the mark-to-market process • Define the risks associated with the portfolio diversification approach CHAPTER 7. MARKET RISK ORGANIZATION AND REPORTING After completing this reading, you should be able to: • Describe the governance of market risk • Explain the purpose of VaR back-testing • Assess the unintended impact of debit valuation adjustment (DVA) • Deduce the meaning of loss advisories and drawdowns • Investigate the weaknesses of economic value (EV) stress testing • Evaluate Earnings-at-Risk stress testing • Describe the main elements of model risk • Describe risk identification for large exposures • Identify uses and users of market risk reports |
| Operational Risk Management | 25% | CHAPTER 1. OPERATIONAL RISK MANAGEMENT After completing this reading, you should be able to: • Describe what operational risk means in the finance industry • Explain the relationship between operational risk management and other risk types • Define the core purpose of operational risk management • Identify obstacles to successful operational risk measurement • Give an operational risk framework overview • Determine who should own the operational risk function • Explain the role of supervisors in the operational risk function • Illustrate how lack of risk culture and awareness is the greatest impediment to successful ORM CHAPTER 2. OPERATIONAL RISK: IDENTIFICATION AND ASSESSMENT After completing this reading, you should be able to: • Differentiate between inherent, residual, and secondary risks • Assess the complete risk identification process • Explain the purpose of risk registers • Evaluate the strengths and weaknesses of risk and control self-assessments (RCSA) • Explain the RCSA questionnaire approach • Examine the RCSA workshop approach • Compare RCSA scoring methods CHAPTER 3. OPERATIONAL RISK: MEASUREMENT After completing this reading, you should be able to: • Differentiate between expected and unexpected losses • Quantity operational risk loss data • Identify what should be collected in the loss data program • Evaluate sources of external loss event data • Design individual scenario analysis methods • Describe the Basel basic indicator approach (BI) • Calculate OR capital using the standardised approach (SA) • Assess the usefulness of the alternative standardised approach (ASA) • Explain the shortcomings of the advanced measurement approach (AMA) • Understand how to model operational risk capital CHAPTER 4. OPERATIONAL RISK: MITIGATION AND CONTROL After completing this reading, you should be able to: • Define core objectives of operational risk mitigation • Explain the workings of the three lines of defence • Explain elements relating to risk appetite • Explain the elements and purpose of due diligence • Describe the benefits and disadvantages of operational risk insurance • Evaluate the additional controls needed for outsourcing, vendor and third-party risk • Understand how governance, risk and compliance (GRC) integrates ORM activities CHAPTER 5. OPERATIONAL RISK: MONITORING AND REPORTING After completing this reading, you should be able to: • Define key operational risk indicators • Identify key performance indicators • Illustrate key control indicators • Describe variants of KRI • Assess loss data reporting • Analyze action tracking and reporting • Explain risk and control self-assessment reporting • Examine key risk indicator reporting |
| Asset and Liability Management | 25% | CHAPTER 1. ALCO AND THE ROLE OF THE TREASURY FUNCTION After completing this reading, you should be able to: • Explain the role of the treasury in a bank and in a non-bank commercial organization • Describe a commercial/retail-only bank model • Illustrate the role of the treasury in a commercial/retail bank with an investment banking operation • Evaluate interest rate and FX risk in Treasury • Evaluate a range of asset and liability management committee (ALCO) activities • Produce a set of mismatch and gap reports • Analyze classic ALM reports • Distinguish between value limits and time limits • Consider the usefulness of volatility limits in risk management • Compare and contrast gross position versus net overall limits CHAPTER 2. INTEREST RATE RISK IN THE BANKING BOOK After completing this reading, you should be able to: • Understand the basic NII risk model • Describe examples of NII risk management • Examine the level of critique raised against the basic NII risk model • Assess the impact of economic value of equity (EVE) in a bank • Explain how to hedge interest rate risk in order to mitigate changes in EVE • Describe the 2016 Basel IRRBB Framework CHAPTER 3 LIQUIDITY RISK IN THE BANKING BOOK After completing this reading, you should be able to: • Define two types of liquidity • Evaluate sources of liquidity problems in banks • Define and compute a liquidity ladder as an example of a static liquidity model • Explain the function of probabilistic liquidity models • Evaluate securitization as a form of liquidity management • Describe the role of funds transfer pricing (FTP) in creating an effective treasury • Compare the cost of funds method with the net funding method • Contrast the pooled funding Method with the matched maturity method • Assess the purpose and effectiveness of the Basel III liquidity measures • Calculate the liquidity coverage ratio (LCR) for several balance sheet scenarios • Describe the objective behind the net stable funding ratio (NSFR) CHAPTER 4. BANK CAPITAL MANAGEMENT After completing this reading, you should be able to: • Distinguish between economic and regulatory capital • Understand the link between economic capital and value-at-risk (VaR) • Describe the background to economic capital methodology • Outline several problems with measuring economic capital • Identify the main components of regulatory capital • Interpret the ratios between different tiers of capital • Recount the Basel III capital rules in the context of ‘quality of capital’ • Describe the purpose of the Basel III leverage rule • Illustrate how “bail-in” capital can be better than ‘bail-out’ capital • Calculate risk-adjusted return on capital (RAROC) for a single transaction CHAPTER 5. OTHER NON-TRADING MARKET RISK IN THE BANKING BOOK After completing this reading, you should be able to: • Understand how credit spread risk applies to non-traded credit risky positions • Explain how foreign exchange risk arises in foreign subsidiary company stock values • Analyze investment risk in strategic and alternative long-term equity investments • Describe how defined benefit staff pension schemes give rise to pension risk • Identify guaranteed product value risks in customer portfolios • Determine economic capital consumption in non-traded market risk positions |
| Official Information | https://www.garp.org/courses/financial-risk-and-regulation |
Updates in the GARP 2016-FRR Exam Topics:
GARP 2016-FRR exam questions and practice test are the best ways to get fully prepared. Study4exam's trusted preparation material consists of both practice questions and practice test. To pass the actual Financial Risk and Regulation 2016-FRR exam on the first attempt, you need to put in hard work on these questions as they cover all updated GARP 2016-FRR exam topics included in the official syllabus. Besides studying actual questions, you should take the GARP 2016-FRR practice test for self-assessment and actual exam simulation. Revise actual exam questions and remove your mistakes with the Financial Risk and Regulation (FRR) Series 2016-FRR exam practice test. Online and Windows-based formats of the 2016-FRR exam practice test are available for self-assessment.
Our Features
- 50000+ Customers feedbacks involved in Products
- Customize your exam based on your objectives
- User-Friendly interface
- Exam History and Progress reports
- Self-Assessment Features
- Various Learning Modes