FRM 2026 Part I Valuation and Risk Models Derivative Valuation Free Quiz 1

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FRM 2026 Part I Valuation and Risk Models Derivative Valuation Free Quiz 1

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FRM 2026 Part I Valuation and Risk Models Derivative Valuation Free Quiz 1

Practice FRM 2026 Part I Valuation and Risk Models MCQs from Derivative Valuation. Get instant results with Explanation.

General10 MCQs

1. What is derivative valuation?

A. Derivative valuation is the same as pricing a stockB. Derivative valuation determines the fair value of a derivative by modeling and discounting future payoffsC. Derivative valuation is only done for optionsD. Derivative valuation does not require a model

2. What is the Black-Scholes model?

A. The Black-Scholes model is used for American optionsB. The Black-Scholes model assumes constant volatility and no risk-free rateC. The Black-Scholes model provides a closed-form solution for European options under assumptionsD. The Black-Scholes model is not used in practice

3. What is the Black-Scholes formula for a European call option?

A. C = S0 × N(d1) - K × e^(-rT) × N(d2)B. C = S0 × N(d1) + K × e^(-rT) × N(d2)C. C = S0 × N(d2) - K × e^(-rT) × N(d1)D. C = S0 × N(d1) - K × N(d2)

4. What is put-call parity?

A. Put-call parity: C + S0 = P + PV(K)B. Put-call parity: C - PV(K) = P - S0C. Put-call parity: C - S0 = P - PV(K)D. Put-call parity: C + PV(K) = P + S0

5. What are the Greeks in option valuation?

A. The Greeks are measures of option profitabilityB. The Greeks measure option price sensitivity to parameters like price, volatility, and timeC. The Greeks are not used in option valuationD. The Greeks are the same as the option's payoff

General10 MCQs

6. What is delta in option valuation?

A. Delta ranges from -1 to 1 for all optionsB. Delta is the sensitivity to volatilityC. Delta is the sensitivity to the underlying price and is used for hedgingD. Delta is constant for all options

7. What is gamma in option valuation?

A. Gamma measures the convexity of the option price and is highest for at-the-money optionsB. Gamma is the sensitivity to volatilityC. Gamma is the sensitivity to time decayD. Gamma is constant for all options

8. What is vega in option valuation?

A. Vega measures sensitivity to underlying priceB. Vega is the same as thetaC. Vega is negative for call optionsD. Vega measures sensitivity to volatility and is highest for ATM, longer-term options

9. What is theta in option valuation?

A. Theta measures sensitivity to volatilityB. Theta measures time decay and is usually negative for option buyersC. Theta is positive for all optionsD. Theta is the same as delta

10. What is rho in option valuation?

A. Rho is the sensitivity to volatilityB. Rho is the sensitivity to underlying priceC. Rho is the sensitivity to interest rates and is positive for calls, negative for putsD. Rho is the same as delta

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FRM

Conducting Body: Global Association of Risk Professionals GARP

Frequency: three times a year: May, August, and November | Time: 240 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 100 MCQs):

Foundations of Risk Management: 25 MCQs
Quantitative Analysis: 25 MCQs
Financial Markets and Products: 25 MCQs
Valuation and Risk Models: 25 MCQs

Merit Formula: -

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