Market Risk — FRM Part 2 Practice Questions

120 free FRM Part 2 questions on Market Risk: 45 easy, 60 medium, and 15 hard, every one exam-realistic and fully explained once you sign in. This is the fastest way to turn Market Risk from a weakness into a scoring area — drill it in 10-question reps with immediate feedback.

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1. A leptokurtic distribution, often modeled by EVT, is characterized by which of the following compared to a Nor
2. If a bank records 11 exceptions in a 250-day backtesting window for 99% VaR, what is the regulatory presumptio
3. In the GPD framework, if the threshold u is chosen too low, what is the most likely error in the resulting mod
4. In the Kupiec Likelihood Ratio test, what does the null hypothesis (H_0) state?
5. The Hill estimator is primarily used to provide a direct estimate of which parameter?
6. What happens to the mean of a GPD-distributed variable if the tail index ξ ≥ 1?
7. What happens to the VaR estimate if we move from a thin-tailed (Gumbel, ξ = 0) model to a heavy-tailed (Fréche
8. What is the base capital multiplier (m) applied to a bank's internal model market risk capital requirement whe
9. What is the maximum 'plus-factor' added to the base multiplier of 3.0 for a bank that records 9 exceptions in
10. Which fixed-income mapping technique treats a bond portfolio as a single zero-coupon bond located at the weigh
11. During a significant market sell-off, how will the measured VaR likely compare to the actual realized loss?
12. A Chief Risk Officer (CRO) is reviewing backtesting results… — What is the most likely structural cause for th
13. A fund manager calculates the 'Marginal VaR' for an equity p… — What does this metric specifically measure?
14. If the shape parameter is ξ = 0.25, what is the tail index α?
15. Which of the following is a unique capability of the Hull-White approach relative to basic HS?
16. If the bank decides to hold economic capital equal to the 99.9th percentile of this annual distribution, which
17. Which of the following statements correctly identifies a structural deficiency of the Gaussian copula in model
18. Which mapping technique is the first to explicitly account for non-parallel shifts in the yield curve, such as
19. If the estimated shape parameter ξ is found to be exactly zero, which specific distribution type does the mode
20. A risk manager uses the Cornish-Fisher expansion to adjust a… — What is the primary purpose of this semi-param
21. A risk practitioner is using the Hill estimator to find the… — What is the practitioner looking for in this 'H
22. In term structure modeling, which characteristic distinguishes the Cox-Ingersoll-Ross (CIR) model from the Vas
23. In the context of backtesting a VaR model, what is a 'Type II error'?
24. If the returns exhibit strong volatility clustering (GARCH effects) and today is a particularly calm day, what
25. An analyst uses a Gaussian copula to model the joint default… — This is a property known as:
26. A risk manager is utilizing the Peaks-over-Threshold (POT) framework to estimate tail risk for a hedge fund po
27. Building on the previous POT scenario (n= 5000, u= 20, N_u= 250, ξ= 0.40, β= 5.0), calculate the 99% Expected
28. Which mapping method would best capture the risk of a yield curve 'steepening' where the 10-year rate rises mo
29. If a risk system models joint defaults using a Gaussian copula calibrated during a period of low volatility, w
30. If a return distribution exhibits negative skewness and positive excess kurtosis, how will the adjusted VaR co