# Q.3274 Quantitative Analysis

There is a 90% chance of having a sunny day on each of next 7 days. What is the probability that there will be exactly 3 sunny days in the next 7 days? A 0.9 B 0.00255 C 0.0625 D 0.00125 The correct answer is: B P(3) = 7!/((7-3)!*3!)*0.93*(1-0.9)7-3 = 0.00255 *User Question: Terribly worded question. There is a 90% chance of having a sunny day on each of next 7 days implies that there's a 90% probability of getting 7 sunny days in a row. ?

FRM Part 1

# Q.3036 Market Risk Measurement and Management

What would be the 95% parametric VaR of a portfolio made of two independently normally distributed stocks - A and B, with A&#8275;N(0.5,1) and B&#8275;N(3,15). Assume that P=(A+B) A 56&times;P B 4.87&times;P C 6.58&times;P D None of the above The correct answer is: C Assuming (A+B), then P&#126;N(3.5,16). As a result, the parametric VaR95% (P) = 1.645 &times; &radic;16 &times; P = 6.58 &times; P *User Question: Why isn't the mean substracted here? ?

FRM Part 1

# Q.138 Foundations of Risk Management

Define Securitization in the context of mortgage facilities A The process of dividing mortgages into several categories depending on their level of risk of default B The process of taking an illiquid asset and transforming it into a liquid financial asset C The process of combining mortgages into one large pool to form a mortgage-backed security that can be sold to third parties D The process of combining several assets to form a large pool of collateral for a mortgage facility The correct answer is: C Securitization entails pooling of mortgages into a large pool that can then be subdivided into parts sellable to investors as financial instruments. By selling the resulting mortgage-backed security, the lender can transfer risks to the market. *User Question: Though neither A or C is a perfect answer, I can't understand why C is better than A. Is this a type of question that we will see during the real exam? that will be very confusing. ?

FRM Part 1

# Q.2599 Cost of Capital

## Credit value at risk, worst case default rate

Hi, Can someone please help me break down the following question. BYJ commercial bank has \$100 million of retail exposures. The 1-year probability of default averages 2% and the recovery rate averages 60%. If the correlation parameter is estimated at 0.1, what will be the 1-year 99.9% credit VaR?&nbsp; Thanks in advance, Wilson