Question 1Modern portfolio theory and the CAPM
An analyst forecasts a return of 12% for a stock with a beta of 1.2. The risk-free rate is 4% and the expected market return is 10%. Relative to the security market line, the stock is:
Prepare for Part I with every number worked.
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Question 2Probability and Bayes' rule
A payment-fraud model flags 99% of fraudulent transactions and only 2% of legitimate ones, yet most of the transactions it flags turn out to be legitimate. Which of the following best explains this?
Question 3Hedging with futures
An airline will buy 2,000,000 gallons of jet fuel in three months and hedges with heating oil futures, each for 42,000 gallons. The minimum variance hedge ratio is 0.92. The number of contracts it should buy, rounded to the nearest whole contract, is:
Question 4Value at risk and expected shortfall
A $50 million equity portfolio has an expected annual return of 8% and annual volatility of 20%. Annual returns are normal. Using a one-tailed 95% z-value of 1.645 and measuring VaR as a positive loss relative to today's value, the one-year 95% VaR is closest to:
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The four topic areas
100 equally weighted questions in four hours, with no formula sheet. In November 2025, 47% of Part I candidates passed.
Foundations of Risk Management
Risk governance and appetite, ERM, credit risk transfer, lessons from crises, the CAPM, factor models and performance measures.
20 questions in each of our mocks
Quantitative Analysis
Probability and Bayes, distributions, hypothesis tests, regression and its diagnostics, time series, EWMA and GARCH, and simulation.
20 questions in each of our mocks
Financial Markets and Products
Banks, insurers and funds, futures and hedge ratios, rates and FRAs, forward pricing, swaps, options, exotics and mortgage-backed securities.
30 questions in each of our mocks
Valuation and Risk Models
VaR and expected shortfall, stress tests, bond pricing and duration, binomial trees, Black-Scholes-Merton, the Greeks and credit loss.
30 questions in each of our mocks
In the course
- 14 interactive lessons
- 194 practice questions, every number worked
- 2 full 100-question mocks in four hours
Guides
Risk Manager Part I Prep Pro
US$449one payment
- 14 interactive lessons
- 194 practice questions with every number worked
- 2 full 100-question practice exams in four hours
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