Valuation and Risk Models — FRM Part 1 Practice Questions

149 free FRM Part 1 questions on Valuation and Risk Models: 48 easy, 66 medium, and 35 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. If a loan has a Probability of Default (PD) of 2.0%, an Exposure at Default (EAD) of $1,000,000, and a Recover
2. What is the Expected Loss (EL)?
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. An investor holds a $10 million portfolio of two assets. Asset A has a weight of 60% and a daily volatility of
6. 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
7. If the exposure at default (EAD) is $1 million, what is the unexpected loss (UL) assuming LGD is fixed?
8. A risk manager is evaluating a portfolio's expected loss (EL… — What is the EL for this portfolio?
9. What is the corresponding 10-day 99% VaR assuming daily returns are independent?
10. A $200 million portfolio has a 1-day 99% VaR of $8 million. If the portfolio comprises a position with 30% wei
11. Using a normal approximation to the binomial distribution, what is the z-score if the bank observes 8 exceptio
12. If the model is correctly calibrated, what is the probability of observing exactly 5 exceptions using the bino
13. What is the Expected Loss (EL) in dollars?
14. In a transition matrix, the values located on the main diagonal (from top-left to bottom-right) represent:
15. What is the expected loss (EL) for the year?
16. If market yields decrease by 150 basis points, what is the estimated percentage price change of the portfolio
17. If the underlying stock price increases by $2.00, what is the estimated new delta of the option?
18. As the option approaches expiry with the stock price very close to $100, what happens to the option's Delta?
19. If the stock price is $100, the strike is $100, the risk-free rate is 5%, and the volatility is 25%, what is t
20. 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
21. A risk manager reports a one-day Value at Risk (VaR) of $5 m… — Which statement correctly interprets this metr
22. For a long European put option, how is the Delta (Δ) generally characterized?
23. How does Expected Shortfall (ES) respond to 'fat tails' (positive excess kurtosis) compared to Value-at-Risk
24. If a portfolio's Expected Shortfall is significantly higher than its Value-at-Risk, what does this suggest abo
25. If a risk manager wants to use Expected Shortfall to encourage 'risk-reducing' behavior among desk traders, wh
26. If you are 'short' an option, your Gamma (Γ) and Vega (ν) exposures are typically:
27. In option trading, the term 'dynamic hedging' refers to the process of:
28. In risk management, what is the 'horizon' of a Value at Risk measure?
29. In the context of the Greeks, which term is mathematically equal to the N(d₁) component of the BSM call formul
30. The 'Monotonicity' axiom, which Expected Shortfall satisfies, states that: