FRM 2026 Part II Market Risk Measurement and Management Expected Shortfall Free Quiz 1

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FRM 2026 Part II Market Risk Measurement and Management Expected Shortfall Free Quiz 1

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FRM 2026 Part II Market Risk Measurement and Management Expected Shortfall Free Quiz 1

Practice FRM 2026 Part II Market Risk Measurement and Management MCQs from Expected Shortfall. Get instant results with Explanation.

General10 MCQs

1. What is Expected Shortfall (ES)?

A. ES is the same as VaRB. ES is the expected loss given that the loss exceeds VaRC. ES is the maximum lossD. ES is not a coherent risk measure

2. Why is Expected Shortfall considered a coherent risk measure?

A. ES is not coherent because it lacks subadditivityB. ES is coherent because it satisfies all properties except subadditivityC. ES is coherent because it satisfies monotonicity, translation invariance, positive homogeneity, and subadditivityD. ES is only coherent for normal distributions

3. What is the role of Expected Shortfall in the FRTB?

A. FRTB replaced VaR with Expected Shortfall (ES) for market risk capitalB. FRTB still uses VaR for market risk capitalC. FRTB uses a combination of VaR and ESD. FRTB uses Expected Shortfall for credit risk only

4. How is Expected Shortfall calculated?

A. ES = VaR / αB. ES = VaR × αC. ES = E[L | L < VaR_α]D. ES = E[L | L > VaR_α]

5. What is the formula for Expected Shortfall under a normal distribution?

A. ES = μ + σ × z_αB. ES = μ + σ × φ(z_α) / (1-α)C. ES = μ + σ / (1-α)D. ES = μ + σ × z_α / (1-α)

General10 MCQs

6. How does Expected Shortfall differ from VaR in capturing tail risk?

A. VaR is more sensitive to tail risk than ESB. ES is less useful than VaR for tail riskC. ES averages losses in the tail, making it more sensitive to tail risk than VaRD. ES and VaR provide the same information about tail risk

7. How is Expected Shortfall estimated in practice?

A. ES can be estimated by averaging losses beyond VaR in historical simulationB. ES cannot be estimated from historical dataC. ES only uses parametric methodsD. ES is always calculated analytically

8. How does the confidence level affect Expected Shortfall?

A. ES is independent of confidence levelB. A higher confidence level lowers ESC. ES is always calculated at 95% confidenceD. A higher confidence level increases ES as it focuses on more extreme tail losses

9. What is the nature of Expected Shortfall as a spectral risk measure?

A. ES is a non-spectral risk measureB. ES is a spectral risk measure that gives equal weight to all losses beyond VaRC. ES assigns higher weights to losses beyond VaRD. ES is not a risk measure

10. What is the advantage of ES over VaR for regulatory capital?

A. ES is more volatile than VaRB. ES is easier to manipulate than VaRC. ES is more stable and less prone to manipulation than VaR because it considers the entire tailD. ES is not used in regulatory capital calculations

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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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