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

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

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

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

General10 MCQs

1. What are volatility models?

A. Volatility models are only used for option pricingB. Volatility models estimate and forecast volatility for risk management and pricingC. Volatility models assume constant volatilityD. Volatility models are not used in practice

2. What is a GARCH model?

A. GARCH models assume constant volatilityB. GARCH models are used for mean estimationC. GARCH models capture volatility clustering with past squared returns and past variancesD. GARCH models are only for stock returns

3. What is the difference between ARCH and GARCH?

A. ARCH models volatility as a function of past squared errors; GARCH adds lagged variancesB. ARCH and GARCH are the same modelC. ARCH models are more general than GARCHD. GARCH models do not include past squared errors

4. What is the EGARCH model?

A. EGARCH assumes symmetric volatilityB. EGARCH does not allow for leverage effectsC. EGARCH models variance linearlyD. EGARCH captures the leverage effect and models log-variance

5. What is the leverage effect in volatility modelling?

A. The leverage effect means positive returns increase volatility moreB. The leverage effect means negative returns increase volatility more than positive returnsC. The leverage effect is not observed in marketsD. The leverage effect is symmetric

General10 MCQs

6. What is the GJR-GARCH model?

A. GJR-GARCH models are symmetricB. GJR-GARCH does not capture leverageC. GJR-GARCH uses a dummy variable to capture the leverage effectD. GJR-GARCH is the same as EGARCH

7. What is a stochastic volatility model?

A. Stochastic volatility models treat volatility as a random processB. Stochastic volatility models are the same as GARCHC. Stochastic volatility models assume constant volatilityD. Stochastic volatility models are not used in practice

8. What is the volatility smile?

A. The volatility smile indicates constant volatilityB. The volatility smile is a flat lineC. The volatility smile is not observed in practiceD. The volatility smile shows higher implied volatility for deep in/out-of-the-money options

9. What is the volatility term structure?

A. The volatility term structure is flatB. The volatility term structure shows implied volatility as a function of maturityC. The volatility term structure is constant over timeD. The volatility term structure is not used in practice

10. What is historical volatility?

A. Historical volatility is the same as implied volatilityB. Historical volatility is forward-lookingC. Historical volatility is based on past returns and is a simple estimateD. Historical volatility is always accurate

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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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