Flashcards · Finance & Accounting
FRM Flashcards
Free flashcards for FRM: flip each card to reveal the definition. Built from the FRM glossary as a study aid, these are concept checks, not real exam questions.
1 / 18
Click the card (or press Space) to flip · use Prev/Next to move
All 18 terms
- Value at Risk (VaR)
- The loss not expected to be exceeded at a given confidence over a horizon.
- Expected shortfall
- The average loss in the tail beyond VaR; a coherent risk measure.
- Market risk
- Risk of loss from moves in prices, rates, FX or commodities.
- Credit risk
- Risk that a counterparty fails to meet an obligation.
- Operational risk
- Risk of loss from people, processes, systems or external events.
- Liquidity risk
- Risk of being unable to fund or trade without large cost.
- Probability of default (PD)
- The chance a borrower defaults over a period.
- Loss given default (LGD)
- The share of exposure lost if default occurs.
- Exposure at default (EAD)
- The amount at risk at the time of default.
- Duration
- A bond's price sensitivity to interest-rate changes.
- Convexity
- How a bond's duration changes as yields change.
- Basis risk
- Risk that a hedge and the hedged item move differently.
- Delta
- An option's price sensitivity to the underlying's price.
- Volatility
- The standard deviation of returns; a key risk input.
- Stress testing
- Estimating losses under severe but plausible scenarios.
- Backtesting
- Checking a risk model against actual outcomes.
- Counterparty risk
- Credit risk that the other side of a trade defaults.
- Hedge
- A position taken to offset a specific risk.