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Question 1
Which of the following BEST describes the difference between PV01 and DV01?
Correct Answer:
PV01 measures the change in present value for a 1 basis point parallel shift in the yield curve, while DV01 is the dollar value of a 1 basis point change — in practice the two terms are used interchangeably
Question 2
A bond has modified duration of 6.0 and a price of $100. What is the approximate DV01?
Correct Answer:
$$0.06
Question 3
Why is key rate duration (KRD) preferred over a single modified duration measure for managing a non-parallel yield curve risk?
Correct Answer:
KRD captures the bond's sensitivity to changes at specific maturity points (e.g. 2y, 5y, 10y, 30y), allowing the manager to hedge twists and butterflies that a single duration cannot
Question 4
Convexity adjustment to a duration-based price estimate is BEST described as:
Correct Answer:
A second-order term that adds approximately 0.5 × Convexity × (Δy)² × Price to the linear duration estimate
Question 5
Which option Greek measures the rate of change of delta with respect to the underlying price?
Correct Answer:
Gamma
Question 1
Exam overview

About this Exam

Prepare with the MLARM Practice Questions - PRMIA Market, Liquidity & ALM Risk Certificate Exam practice quiz. This question bank includes 100 questions covering risk, rate, bank, irrbb, and duration. Use it to review important concepts, identify knowledge gaps, and build confidence for the related exam, course, or assessment.

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MLARM Practice Questions - PRMIA Market, Liquidity & ALM Risk Certificate Exam

This practice set contains 100 questions from the matching question bank and focuses on risk, rate, bank, irrbb, and duration. Work through each question carefully, review the provided solutions, and revisit topics that need more study before your next attempt.

This is an independent study resource intended for practice and review; it is not an official examination or an endorsement by any organization named in the title.

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