Valuation and Risk Models — FRM Part 1 Practice Questions

188 free FRM Part 1 questions on Valuation and Risk Models: 66 easy, 98 medium, and 24 hard, every one exam-realistic and fully explained once you sign in. This is the fastest way to turn Valuation and Risk Models from a weakness into a scoring area — drill it in 10-question reps with immediate feedback.

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1. What is the Expected Loss (EL)?
2. If a loan has a Probability of Default (PD) of 2.0%, an Exposure at Default (EAD) of $1,000,000, and a Recover
3. If market yields rise by 150 basis points (0.015), what is the estimated new price of the bond using both dura
4. A stock trades at S_0 = $100. A European call struck at K = $100 expires in 1 year. If the volatility is 20% a
5. If the manager scales the VaR to a 10-day horizon using the square-root-of-time rule, what is the likely bias
6. An investor holds a $10 million portfolio of two assets. Asset A has a weight of 60% and a daily volatility of
7. Using a simple 'credit-triangle' approximation, what is the fair annual CDS spread in basis points?
8. If the exposure at default (EAD) is $1 million, what is the unexpected loss (UL) assuming LGD is fixed?
9. A risk manager is evaluating a portfolio's expected loss (EL… — What is the EL for this portfolio?
10. A call option has a delta of 0.60 and a gamma of 0.05. If the underlying stock price increases by $2, what is
11. A 1-day 99% VaR of $250,000 was calculated for a desk. If the desk experiences a daily loss of $300,000, how i
12. In the context of the Greeks, which term is mathematically equal to the N(d₁) component of the BSM call formul
13. What is the corresponding 10-day 99% VaR assuming daily returns are independent?
14. As the option approaches expiry with the stock price very close to $100, what happens to the option's Delta?
15. A fixed-income manager is concerned about a 'steepening' of… — Which risk metric would best capture this expos
16. Using a normal approximation to the binomial distribution, what is the z-score if the bank observes 8 exceptio
17. What is the Expected Loss (EL) in dollars?
18. In a transition matrix, the values located on the main diagonal (from top-left to bottom-right) represent:
19. A risk manager reports a one-day Value at Risk (VaR) of $5 m… — Which statement correctly interprets this metr
20. A $200 million portfolio has a 1-day 99% VaR of $8 million. If the portfolio comprises a position with 30% wei
21. For a long European put option, how is the Delta (Δ) generally characterized?
22. In risk management, what is the 'horizon' of a Value at Risk measure?
23. If the market suddenly enters a period of extreme stress, how will the Historical Simulation VaR likely behave
24. If a portfolio's Expected Shortfall is significantly higher than its Value-at-Risk, what does this suggest abo
25. If you are 'short' an option, your Gamma (Γ) and Vega (ν) exposures are typically:
26. In option trading, the term 'dynamic hedging' refers to the process of:
27. If the model is correctly calibrated, what is the probability of observing exactly 5 exceptions using the bino
28. If the stock price is $100, the strike is $100, the risk-free rate is 5%, and the volatility is 25%, what is t
29. What is the expected loss (EL) for the year?
30. What is the risk-neutral probability (p) of an up-move in each $6-month step?