2016-FRR Exam Dumps | The mark-to-market process includes which one of the following activities?

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GARP.2016-FRR.v2025-06-21.q161
Question 143

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Question 143/161

The mark-to-market process includes which one of the following activities?

A. Estimating the market value of all the transactions held in the banking book

B. Paying cash for the settled portion of the derivatives trade at the market price

C. Obtaining and verifying market prices for all the instruments held in the trading book

D. Assessing the profitability of each trade compared with the aggregate market

Correct Answer: C

Comprehensive and Detailed In-Depth Explanation:
Mark-to-market (MtM) involves valuing positions at current market prices daily, primarily for the trading book (e.g., securities, derivatives). Option C-obtaining and verifying market prices for trading book instruments-is the core MtM activity under Basel III's market risk rules. Option A applies to the banking book (not typically MtM), Option B describes settlement, and Option D is a profitability analysis, not MtM.
Exact Extract from Official Source:
* BCBS, "Basel III: A Global Regulatory Framework," December 2010, para. 688: "Mark-to-market requires banks to obtain current market prices and verify them daily for all trading book positions to reflect fair value."
* GARP FRR Study Notes, Market Risk Section: "The MtM process entails collecting and validating market prices for trading book instruments to determine their current value." Reference:BCBS, "Basel III," para.688; GARP FRR Study Notes, Market Risk Section.

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