FRM mock 2
Finance Junkie
Posts: 205
Joined: Mon Feb 04, 2013 3:35 pm

FRM mock 2

Postby » Thu Oct 30, 2014 3:23 pm

For a bank, what should be the economic capital so that we can avert 95% of the time the
unexpected loss? Assume the unexpected loss follows the function F(x)= e^((
2/36) .
Select one:
a. 15 million $
b. 11 Million $
c. 12 Million $
d. 16 Million $

Can you please explain the answer and please tell me which book,chapter this belongs to ...i am kinda lost

Finance Junkie
Posts: 791
Joined: Wed Apr 09, 2014 6:28 am

FRM mock 2

Postby edupristine » Fri Oct 31, 2014 8:09 am

For 95% Confidence Interval, Z value = 1.65

Now compare the formula F(x)= e^(-(x-6)^2/36) with F(x) = e^-[(x-mean)/std dev)]^2

Mean Value is 6

Standard Dev is also 6

So, the upper limit = 6+(6*1.65) = 15.9= approx. 16

This question embodies concepts from both Quants (Hypothesis Testing) and credit risk.

Return to “FRM Part II”


Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.