Option 2: Combining tables - Denormalization involves combining normalized tables into fewer tables to reduce the number of joins required in queries. By doing so, the database architect can decrease the complexity of queries, leading to improved query performance. However, it's essential to carefully analyze the trade-offs, such as potential data redundancy and update anomalies, before implementing denormalization. This option is correct because combining tables is a fundamental step in denormalizing a database schema to optimize query performance. 

The Federation Server component in DB2 facilitates the integration of DB2 with external systems. It enables access to distributed data sources as if they were within a single database, enhancing interoperability. 

The Lock Manager in DB2's architecture plays a crucial role in ensuring data integrity by enforcing concurrency control mechanisms. It coordinates the access to shared resources such as database objects by multiple transactions, ensuring that only one transaction can modify a particular resource at a time to prevent conflicts and maintain data consistency. This helps in preventing issues like data corruption or inconsistent results due to concurrent access. 

Troubleshooting installation errors involves checking system requirements, reviewing installation logs for errors, verifying network connectivity, and ensuring administrative privileges for installation. 

DB2 replaces invalid characters with a specified replacement character. When dealing with XML data, DB2 has a feature to handle invalid characters within tags by replacing them with a specified replacement character, which can be customized based on the user's requirements. This ensures that the XML remains well-formed and can be processed without errors. 

Concurrent transactions are handled simultaneously in DB2, allowing multiple users to access and manipulate data concurrently without waiting for each other. This concurrency control mechanism enhances system throughput and user satisfaction. 

Relationships in an Entity-Relationship Diagram (ERD) depict the associations between entities. They represent how entities are connected or related to each other in the database schema. Examples of relationships include "owns," "works for," or "is part of." 

User-defined functions (UDFs) play a crucial role in database queries by simplifying complex logic. They allow for modularization of code, enhancing query readability, and facilitating code reuse. 

The Recovery Point Objective (RPO) specifies the maximum acceptable frequency of data loss during a disaster. It helps in determining the interval between data backups or replication to ensure minimal data loss in case of a disaster. 

The DELETE command is used to remove rows from a table based on a specified condition. It is commonly used to delete specific records or all records from a table depending on the condition. 

The AVG() function in DB2 calculates the average of a set of values in a column. When NULL values are encountered, the AVG() function ignores them during the calculation, effectively treating them as missing data and excluding them from the average calculation. Therefore, NULL values do not contribute to the sum of values divided by the count of non-NULL values. 

During DB2 installation, users can choose between different installation options based on their requirements. Express installation offers a quick setup with default settings, while Custom installation allows users to customize installation parameters according to their needs. Typical installation provides a standard setup with common configurations, and Advanced installation offers extensive customization options for experienced users.