Medium FRM Part 2 Practice Questions

323 free medium-difficulty FRM Part 2 questions, drawn live from KomFi's calibrated bank. The exam backbone: the difficulty band where most scoring happens.

1. What is the primary reason why risk-neutral probabilities of default (PD) extracted from credit spreads are ge
2. A bank utilizes a 'through-the-cycle' (TTC) rating system. During a sharp economic downturn, what behavior sho
3. If the Area Under the Curve (AUC) from the Receiver Operating Characteristic (ROC) is 0.85, what is the calcul
4. For a derivatives portfolio, which Counterparty Credit Risk (CCR) metric is primarily used for setting interna
5. In the comparison of rating system philosophies, which system is characterized by stable ratings that rarely m
6. A bank's internal model for Credit Value Adjustment (CVA) us… — Why is this required by regulatory and account
7. Which resource is typically the second to be utilized after the defaulting member's own initial margin is exha
8. In a structural model, the 'default risk premium' is represented by the gap between:
9. What is the implied CCF?
10. Under the 'Black-Cox' extension of the Merton model, default can occur whenever asset value hits a barrier. Th
11. What does the term 'RPV01' (Risky PV01) represent in the context of credit default swap valuation?
12. If the swap significantly reduces the directional exposure of the bank's existing netting set with that fund
13. Which of the following is an example of RWR?
14. According to the Merton structural model of credit risk, equity holders can be viewed as holding which of the
15. If the risky annuity (RPV01) is 4.2 and the par spread is 150 basis points, what is the value of the protectio
16. Which of the following best describes why CVA or capital charges still apply?
17. A risk analyst is pricing a new credit-sensitive derivative.… — What is the most likely reason for this?
18. A risk practitioner calculates the 'incremental CVA' of a ne… — Under what condition can this incremental CVA
19. How does an 'Overcollateralization (OC) Test' in a Collateralized Loan Obligation (CLO) protect senior notehol
20. In a Central Counterparty (CCP) default waterfall, which component is typically the first line of defense used
21. In securitization, why is 'excess spread' considered a 'flow' rather than a 'stock' of credit enhancement?
22. In the Basel III regulatory framework, the Exposure at Default (EAD) for counterparty credit risk under the In
23. In the context of the Merton model, why is the 'Distance to Default' (DD) usually mapped to an empirical distr
24. The Basel IRB capital formula (Vasicek model) assumes an 'as… — What is the primary implication of this assump
25. If the pool realizes $120 million in credit losses, what is the percentage loss to the Mezzanine tranche?
26. Which of the following describes the 'Debit Valuation Adjustment' (DVA) gain reported by banks during the 2008
27. When computing the Credit Valuation Adjustment (CVA) for a counterparty, which probability distribution should
28. Which of the following scenarios best exemplifies 'Specific Wrong-Way Risk'?
29. Using the standard flat-spread approximation, what is the implied annual hazard rate (λ)?
30. After the defaulting member's own initial margin is exhausted, what is typically the next layer of protection?

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