Skip to content

FRM Part II · FRM Exam Part II · Future Value and Exposure

A bank simulates the exposure of a netted portfolio at four equally spaced dates over one year (end of quarters 1, 2, 3, 4). The expected exposures (EE) are USD 8 million, 12 million, 10 million and 6 million. Using a simple average of the EE values across these dates with equal weights, what is the expected positive exposure (EPE)?

Expected positive exposure is the average of expected exposure over the time horizon. With EE values of 8, 12, 10 and 6 million, the sum is 36 million and dividing by four dates gives USD 9.0 million.

  1. AUSD 9.0 millionCorrect
  2. BUSD 10.0 million
  3. CUSD 12.0 million
  4. DUSD 36.0 million

Explanation

EPE is the time-average of EE. Sum = 8 + 12 + 10 + 6 = 36; divided by 4 equals 9.0. Option 3 is the sum without dividing, and option 2 is the peak EE, which is closer to a maximum measure than an average.

Did you get it right without looking?

One question tells you little. A timed set on Future Value and Exposure shows your real accuracy, how long you take and where you lose marks.

Practise Future Value and ExposureFree diagnostic mock

More Future Value and Exposure questions