Skip to content

FRM Part II · FRM Exam Part II · Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk)

The IMF analysis distinguishes between a general geopolitical risk index and its sub-components. Which use of the GPR index's separate threats and acts components is most appropriate?

The threats and acts sub-indices let analysts compare market reactions to anticipated geopolitical tensions with reactions to realized events like war outbreaks or attacks. That helps separate forward-looking risk pricing from realized shocks. They are not used for capital requirements, ratings substitution or copula correlations.

  1. AComparing market reactions to anticipated tensions (threats) versus realized events (acts)Correct
  2. BReplacing sovereign credit ratings with a single numeric score
  3. CCalculating bank capital requirements under the standardized approach
  4. DEstimating the default correlation in a Gaussian copula

Explanation

The GPR is split into a threats index, covering the risk of events such as war threats and military buildups, and an acts index, covering actual events such as the beginning of war or terrorist attacks. Separating them lets analysts compare how markets price anticipated versus realized events. The other options are unrelated to its purpose.

Did you get it right without looking?

One question tells you little. A timed set on Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk) shows your real accuracy, how long you take and where you lose marks.

Practise Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk)Free diagnostic mock

More Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk) questions