Easy FRM Part 2 Practice Questions

213 free easy-difficulty FRM Part 2 questions, drawn live from KomFi's calibrated bank. Build the foundation first: these test the core mechanics every harder question assumes.

1. According to the structural Merton model, the equity of a levered firm can be viewed as which type of derivati
2. A Merton-style structural credit model treats a firm's equit… — In this framework, what does the strike price
3. If the exposure is $100,000 and the LGD is 50%, what is the implied Probability of Default (PD)?
4. For a highly rated AAA corporate bond, the EL is typically very low because:
5. If a firm's leverage increases (Assets V stay same, Debt F increases), how does the Merton model predict the P
6. If an investor owns a bond and buys a CDS on that same bond from a highly rated bank, they have primarily elim
7. In a CDS valuation model, what does the 'Survival Probability' S(t) represent?
8. In a standard single-name credit default swap (CDS) contract, which of the following best describes the primar
9. Structural models generally require which set of primary inputs to estimate a firm's default probability?
10. Under IFRS 9 accounting, 'Stage 1' assets require a provision based on:
11. Which component of a credit default swap represents the expected present value of the contingent payment made
12. Which of the following describes 'physical settlement' in a CDS contract?
13. Which of the following events is generally considered a 'credit event' that would trigger the protection leg o
14. Which parameter in the EL formula is most likely to be affected by the presence of high-quality physical colla
15. The Basel III CVA capital charge was primarily introduced to address:
16. What is the appropriate confidence level for its internal Economic Capital (EC) model?
17. What is 'Wrong-Way Risk' in the context of counterparty credit risk?
18. An institutional desk buys Credit Default Swap (CDS) protect… — Which structural flaw is most prominent in thi
19. An institutional validation unit reports that a newly develo… — What is the corresponding Accuracy Ratio (AR)
20. If a bank utilizes a 'Through-the-Cycle' (TTC) approach, what will likely be observed in the realized default
21. If a transition matrix is 'Through-the-Cycle' (TTC), what is the expected behavior of the ratings when the eco
22. In a 'Point-in-Time' (PIT) rating system, what happens to the transition matrix during an economic expansion?
23. Under the Markov assumption, if M is a one-year transition matrix, how is the two-year transition matrix calcu
24. What is the mathematical requirement for the sum of all probabilities in any single row of a transition matrix
25. What is the result of multiplying a row vector representing the current portfolio distribution (by rating) by
26. When validating a credit scoring model, which of the following best describes the property of 'Calibration'?
27. If the CDS spread is 300 bp and the assumed recovery is 40%, what is the annual hazard rate (λ)?
28. An internal audit of a bank's rating system reveals that dur… — How should this rating system be classified?
29. A bank calculates its Credit Valuation Adjustment (CVA). Which of the following inputs must be used to ensure
30. In the default waterfall of a Central Counterparty (CCP), which resources are typically the first to be consum

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