2016-FRR Exam Dumps | Which one of the following four examples would not be considered a typical source of market risk?

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Financial Risk and Regulation (FRR) Series
GARP.2016-FRR.v2025-06-21.q161
Question 36

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Question 36/161

Which one of the following four examples would not be considered a typical source of market risk?

A. Unexpected changes in the term structure of interest rates.

B. The JPY depreciating against the USD.

C. Increased default rate on commercial mortgages due to higher interest rates.

D. Changes in the oil price due to the discovery of new oil fields.

Correct Answer: C

Market risk typically involves risks that affect the entire market or market segment. These include:
* Unexpected changes in the term structure of interest rates:
* This affects the prices of bonds and other interest-rate-sensitive securities.
* The JPY depreciating against the USD:
* This is an example of foreign exchange risk, which is a type of market risk.
* Changes in the oil price due to the discovery of new oil fields:
* This affects commodities markets and can have broader economic implications.
* Increased default rate on commercial mortgages due to higher interest rates:
* This is more of a credit risk than market risk. It specifically relates to the creditworthiness of borrowers rather than the overall market movements.
Thus, the increased default rate on commercial mortgages due to higher interest rates is not a typical source of market risk.
References
Source: How Finance Works

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