Risk & Investment Management — FRM Part 2 Practice Questions

86 free FRM Part 2 questions on Risk & Investment Management: 19 easy, 60 medium, and 7 hard, every one exam-realistic and fully explained once you sign in. This is the fastest way to turn Risk & Investment Management from a weakness into a scoring area — drill it in 10-question reps with immediate feedback.

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1. A hedge fund strategy captures frequent small gains but suff… — This risk profile is most characteristic of wh
2. An active manager has an Information Coefficient (IC) of 0.06 and a breadth (BR) of 400 independent bets per y
3. A risk manager is evaluating an 'Illiquid Asset' (e.g., Priv… — Why is the 'Autocorrelation' of these returns
4. If the reported volatility is 10% and the first-order autocorrelation (φ) of returns is 0.45, what is the esti
5. In the context of Liquidity Risk, the 'Denominator Effect' refers to which of the following scenarios?
6. If the manager effectively doubles the breadth (BR) of the strategy while maintaining the same IC, by what fac
7. If the returns exhibit an autocorrelation of φ = 0.50, what is the corrected Sharpe ratio (assuming the risk-f
8. What is the most defensible estimate for the fund's 'true' economic beta?
9. What is the manager's estimated Information Ratio (IR)?
10. Why might a risk manager view the private fund as riskier?
11. If a pension plan increases its allocation to long-duration bonds, which of the following changes is most like
12. If a position is removed from a portfolio, the change in total VaR is exactly equal to its:
13. A portfolio has a total VaR of 50 million. It contains a position with a market value of 200 million and a bet
14. Which risk measure is best suited for risk budgeting (e.g., setting a $500 million risk limit for the Equity d
15. If assets (A) are 120 billion and liabilities (L) are 100 billion, with σ_A = 11% and σ_L = 12%, by how much d
16. Under the organizing insight of modern investment risk, an asset's expected excess return is primarily viewed
17. If the bank decides to liquidate Desk A, will the bank's total VaR fall by exactly $40 million?
18. Which of the following is a common error when evaluating a potential trade using Marginal VaR?
19. Which of the following identifies the fundamental difference between Incremental VaR and Marginal VaR?
20. An active manager employs a strategy with an Information Coefficient (IC) of 0.05 and makes 100 independent in
21. If you sum the Component VaRs of all desks in a bank, the result will be:
22. Which measure acts as the 'Euler share' of portfolio risk, attributing a specific percentage of the total VaR
23. If a risk manager wants to identify which position to reduce in order to lower total portfolio risk most effic
24. In the 'alpha-beta separation' argument, why might a pension fund restructure its manager lineup to pay active
25. A desk head argues that a position has 'zero risk' because i… — According to the risk decomposition framework
26. An analyst calculates that Asset 1 has a Component VaR of 12… — What is the most likely interpretation of this
27. A fund manager calculates the Information Ratio (IR) for a strategy. If the Information Coefficient (IC) is 0.
28. According to factor theory, why does an asset that pays off during 'bad times' (such as a flight-to-quality in
29. If simulations show the steady-state NAV per vintage averages 2.4 times the annual commitment rate, what shoul
30. If the manager will be one of many in a well-diversified portfolio, which should be preferred and why?