FRM 2026 Part II Credit Risk Measurement and Management Counterparty Risk Free Quiz 1

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FRM 2026 Part II Credit Risk Measurement and Management Counterparty Risk Free Quiz 1

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FRM 2026 Part II Credit Risk Measurement and Management Counterparty Risk Free Quiz 1

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

General10 MCQs

1. What is counterparty risk?

A. Counterparty risk is the same as market riskB. Counterparty risk is the risk of default by the other party in a transactionC. Counterparty risk is only for derivativesD. Counterparty risk is not significant for financial institutions

2. What is the Credit Value Adjustment (CVA)?

A. CVA is the credit risk of the derivative itselfB. CVA is the same as the credit spreadC. CVA is the adjustment for counterparty credit risk, the expected loss due to defaultD. CVA is not used in derivative pricing

3. What is the Debit Value Adjustment (DVA)?

A. DVA is the adjustment for the entity's own credit riskB. DVA is the same as CVAC. DVA is the adjustment for counterparty credit riskD. DVA is not used in derivative pricing

4. How does collateral mitigate counterparty risk?

A. Collateral does not reduce counterparty riskB. Collateral is only for loans, not derivativesC. Collateral is optional for derivativesD. Collateral reduces counterparty risk by securing the exposure

5. What is netting and its role in counterparty risk?

A. Netting increases counterparty riskB. Netting reduces counterparty risk by offsetting obligationsC. Netting is not used in derivativesD. Netting is the same as collateral

General10 MCQs

6. What is Potential Future Exposure (PFE)?

A. PFE is the current exposureB. PFE is the exposure at defaultC. PFE is the maximum expected future exposure at a confidence levelD. PFE is not used in counterparty risk

7. What is current exposure in counterparty risk?

A. Current exposure is the positive mark-to-market value of a derivativeB. Current exposure is the notional amountC. Current exposure is the future exposureD. Current exposure is not used in CVA

8. What is wrong-way risk in counterparty risk?

A. Wrong-way risk means exposure is negatively correlated with default probabilityB. Wrong-way risk is not a concernC. Wrong-way risk is the same as counterparty riskD. Wrong-way risk occurs when exposure and default probability are positively correlated

9. What is the ISDA Master Agreement?

A. ISDA Master Agreement is not used in derivativesB. ISDA Master Agreement governs derivatives relationships with netting and collateral provisionsC. ISDA Master Agreement is optionalD. ISDA Master Agreement only covers interest rate swaps

10. What is a Credit Support Annex (CSA)?

A. CSA is the same as the ISDA Master AgreementB. CSA is optionalC. CSA specifies collateral terms between counterpartiesD. CSA is not used in practice

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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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