Financial Markets and Products — FRM Part 1 Practice Questions

154 free FRM Part 1 questions on Financial Markets and Products: 42 easy, 93 medium, and 19 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. A trader creates an iron condor by selling a 90 put, buying… — What is the maximum loss for this strategy?
4. An American put option is deep in the money. Why might it be optimal to exercise this option early?
5. The variation margin is the cash amount that is:
6. What is the maximum possible loss for an investor who writes (shorts) a naked call option?
7. If the standard deviation of futures price changes (σ_F) is much larger than the standard deviation of spot pr
8. Which exotic option would a speculator use if they believe a stock will experience a massive, sudden rally to
9. If at maturity the futures price were significantly higher than the spot price, what would occur?
10. In a commodity market where the convenience yield is significantly higher than the sum of the risk-free rate a
11. Calculate the probability of survival for an obligor over three years if the constant hazard rate (λ) is 4% pe
12. In a plain-vanilla interest-rate swap, which of the following best describes the fundamental exchange occurrin
13. In the context of Option Greeks and dynamic hedging, why does a delta-neutral portfolio consisting of short ca
14. If a clearinghouse uses its own 'skin in the game' to cover a default, where does this typically sit in the de
15. In the standard credit rating hierarchy used by major agencies, which of the following ratings represents the
16. What does a high convenience yield typically signal about the underlying physical commodity market?
17. A bank holds a large position in an OTC interest rate swap and is concerned about the risk that the counterpar
18. If the yields in the Treasury market increase significantly and the yield curve undergoes a parallel upward sh
19. Why is it NOT considered a down payment?
20. What is a major disadvantage of an OTC forward for a participant who needs to exit their position early?
21. If the 2-year rate rises by 30 basis points and the 10-year rate falls by 20 basis points (with the 5-year rat
22. 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
23. What is the put's price, and what would happen if the put traded at $2.00?
24. Given a risk-free rate of 4% and storage costs of 2%, what does the 'backwardation' in this market primarily s
25. If the basis (Spot - Futures) 'strengthens' (becomes more positive), what is the outcome for the hedger?
26. What is the most likely outcome?
27. In a 'Dollar Roll' transaction, the investor:
28. A 'long' position in which of the following provides insurance against a rise in prices?
29. In the context of derivative markets, what does the term 'counterparty credit risk' specifically refer to for
30. What happens if a futures trader fails to meet a variation margin call in a timely manner?