Financial Markets and Products — FRM Part 1 Practice Questions

128 free FRM Part 1 questions on Financial Markets and Products: 43 easy, 58 medium, and 27 hard, every one exam-realistic and fully explained once you sign in. This is the fastest way to turn Financial Markets and Products from a weakness into a scoring area — drill it in 10-question reps with immediate feedback.

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1. If the oil market shifts from backwardation to a persistent contango, which of the following best describes th
2. If at the time of delivery S_1 = $72 and F_1 = $74, while the hedge was entered at F_0 = $78, what is the basi
3. According to the standard 'Default Waterfall' of a Central Counterparty (CCP), which layer of financial resour
4. A 'Fallen Angel' is a term used in the bond market to describe:
5. A 'long' position in which of the following provides insurance against a rise in prices?
6. An American put option is deep in the money. Why might it be optimal to exercise this option early?
7. If at maturity the futures price were significantly higher than the spot price, what would occur?
8. How is the 'swap rate' typically determined at the inception of an interest-rate swap?
9. If a 2-year swap has annual resets and the current 1-year and 2-year zero rates are 3% and 4%, why might the 2
10. If a clearinghouse uses its own 'skin in the game' to cover a default, where does this typically sit in the de
11. Immediately following a reset date (and the subsequent payment), what is the value of the floating-rate leg (B
12. In a clearinghouse structure, multilateral netting allows for:
13. In an exchange-traded gold futures contract, if the account balance falls below the 'Maintenance Margin' level
14. In a plain-vanilla interest-rate swap, which of the following best describes the fundamental exchange occurrin
15. In the context of derivative markets, what does the term 'counterparty credit risk' specifically refer to for
16. In the standard credit rating hierarchy used by major agencies, which of the following ratings represents the
17. Why is it NOT considered a down payment?
18. The variation margin is the cash amount that is:
19. What happens if a futures trader fails to meet a variation margin call in a timely manner?
20. What is a major disadvantage of an OTC forward for a participant who needs to exit their position early?
21. What is the maximum possible loss for an investor who writes (shorts) a naked call option?
22. What is the primary reason why time value is greatest for an at-the-money (ATM) option?
23. What is the primary risk associated with 'Point-in-Time' (PIT) ratings when used for determining regulatory ca
24. A binary 'cash-or-nothing' put option pays Q if S_T < K. If the underlying asset's volatility increases, how d
25. What is the put's price, and what would happen if the put traded at $2.00?
26. If the basis (Spot - Futures) 'strengthens' (becomes more positive), what is the outcome for the hedger?
27. What is the Weighted Average Coupon (WAC) of the pool?
28. An airline hedges its jet fuel requirements using heating oil futures. The standard deviation of jet fuel pric
29. What is the riskless profit per share from an arbitrage trade?
30. If the underlying asset price at maturity is $62, what is the net profit of the position?