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. Which of the following statements correctly identifies a structural deficiency of the Gaussian copula in model
2. If the shape parameter is ξ = 0.25, what is the tail index α?
3. A leptokurtic distribution, often modeled by EVT, is characterized by which of the following compared to a Nor
4. In the GPD framework, if the threshold u is chosen too low, what is the most likely error in the resulting mod
5. If a bank records 11 exceptions in a 250-day backtesting window for 99% VaR, what is the regulatory presumptio
6. A fund manager calculates the 'Marginal VaR' for an equity p… — What does this metric specifically measure?
7. Which fixed-income mapping technique treats a bond portfolio as a single zero-coupon bond located at the weigh
8. What happens to the mean of a GPD-distributed variable if the tail index ξ ≥ 1?
9. What happens to the VaR estimate if we move from a thin-tailed (Gumbel, ξ = 0) model to a heavy-tailed (Fréche
10. What is the base capital multiplier (m) applied to a bank's internal model market risk capital requirement whe
11. What is the maximum 'plus-factor' added to the base multiplier of 3.0 for a bank that records 9 exceptions in
12. A Chief Risk Officer (CRO) is reviewing backtesting results… — What is the most likely structural cause for th
13. Which of the following is a unique capability of the Hull-White approach relative to basic HS?
14. The Hill estimator is primarily used to provide a direct estimate of which parameter?
15. During a significant market sell-off, how will the measured VaR likely compare to the actual realized loss?
16. In the Kupiec Likelihood Ratio test, what does the null hypothesis (H_0) state?
17. If the bank decides to hold economic capital equal to the 99.9th percentile of this annual distribution, which
18. Which mapping technique is the first to explicitly account for non-parallel shifts in the yield curve, such as
19. In term structure modeling, which characteristic distinguishes the Cox-Ingersoll-Ross (CIR) model from the Vas
20. In the context of backtesting a VaR model, what is a 'Type II error'?
21. A risk manager is utilizing the Peaks-over-Threshold (POT) framework to estimate tail risk for a hedge fund po
22. Building on the previous POT scenario (n= 5000, u= 20, N_u= 250, ξ= 0.40, β= 5.0), calculate the 99% Expected
23. A risk manager uses the Cornish-Fisher expansion to adjust a… — What is the primary purpose of this semi-param
24. An analyst uses a Gaussian copula to model the joint default of two firms. They observe that as the threshold
25. A risk practitioner is using the Hill estimator to find the… — What is the practitioner looking for in this 'H
26. If the estimated shape parameter ξ is found to be exactly zero, which specific distribution type does the mode
27. If the returns exhibit strong volatility clustering (GARCH effects) and today is a particularly calm day, what
28. Which mapping method would best capture the risk of a yield curve 'steepening' where the 10-year rate rises mo
29. Which unit will likely have a higher Component VaR?
30. A portfolio manager holds a two-asset portfolio with 60% in Asset A and 40% in Asset B. The individual standar