FRM 2026 Part II Credit Risk Measurement and Management Counterparty Risk Free Quiz 2

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FRM 2026 Part II Credit Risk Measurement and Management Counterparty Risk Free Quiz 2

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FRM 2026 Part II Credit Risk Measurement and Management Counterparty Risk Free Quiz 2

Practice FRM 2026 Part II Credit Risk Measurement and Management MCQs from Counterparty Risk. Get instant results with Explanation.

General10 MCQs

1. What is the close-out amount in counterparty risk?

A. Close-out amount is the termination payment upon defaultB. Close-out amount is the notional amountC. Close-out amount is the current exposureD. Close-out amount is not defined

2. What is the role of the CVA desk?

A. The CVA desk is not a real functionB. The CVA desk only calculates CVA, not hedgesC. The CVA desk is optionalD. The CVA desk manages counterparty credit risk, including CVA calculation and hedging

3. What is the margin period of risk?

A. Margin period of risk is the time between tradesB. Margin period of risk is the time between last margin call and close-outC. Margin period of risk is the same as the settlement periodD. Margin period of risk is not used in risk management

4. How is CVA calculated?

A. CVA = PD × LGD × EADB. CVA is the same as the credit spreadC. CVA is the expected loss over the derivative life, discountedD. CVA is constant for all derivatives

5. What is the bilateral CVA (BCVA)?

A. BCVA = CVA - DVAB. BCVA = CVA + DVAC. BCVA = CVA × DVAD. BCVA = CVA / DVA

General10 MCQs

6. How does central clearing mitigate counterparty risk?

A. Central clearing increases counterparty riskB. Central clearing is not used for derivativesC. Central clearing does not reduce counterparty riskD. Central clearing reduces counterparty risk by using a CCP

7. What are initial margin and variation margin?

A. Initial margin covers current exposureB. Initial margin covers potential future exposure; variation margin covers daily changesC. Variation margin is collected at inceptionD. Initial margin is exchanged daily

8. How is counterparty risk regulated after the financial crisis?

A. Counterparty risk is not regulatedB. Basel III only regulates market riskC. Basel III introduced CVA capital charges and central clearing requirementsD. Regulation of counterparty risk is optional

9. What is EAD for derivatives?

A. EAD for derivatives includes current and potential future exposureB. EAD for derivatives is the notional amountC. EAD for derivatives is the current exposure onlyD. EAD for derivatives is not used in CVA

10. What are the types of wrong-way risk?

A. Wrong-way risk has only one typeB. Wrong-way risk is not a concernC. Wrong-way risk is the same as market riskD. Wrong-way risk can be general or specific, and is a key challenge

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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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