Question 1

Taking collateral to hedge the credit risk on a counterparty means that you have:

Accepted Answer

A)  Eliminated credit risk 
B)  Eliminated market risk 
C)  Taken a guarantee from the issuer of the collateral 
D)  Taken on market, legal and operational risks 
A)  Eliminated credit risk 
B)  Eliminated market risk 
C)  Taken a guarantee from the issuer of the collateral 
D)  Taken on market, legal and operational risks

Question 2

A 6-month SEK/NOK Swap is quoted 40/50. Spot is 1.1145. Which of the following statements is correct?

Accepted Answer

A)  SEK interest rates are higher than NOK interest rates 
B)  NOK interest rates are higher than SEK interest rates 
C)  NOK interest rates are higher than USD interest rates 
D)  SEK interest rates and NOK interest rates are converging 
A)  SEK interest rates are higher than NOK interest rates 
B)  NOK interest rates are higher than SEK interest rates 
C)  NOK interest rates are higher than USD interest rates 
D)  SEK interest rates and NOK interest rates are converging

Question 3

The premium on an option contract is:

Accepted Answer

A)  The price of the underlying commodity at the time of the transaction 
B)  The price at which the transaction on the underlying commodity will be carried out if and when the option is exercised 
C)  The price the buyer of the option pays to the seller when entering into the options contract 
D)  The price at which the two counterparties can close-out their position 
A)  The price of the underlying commodity at the time of the transaction 
B)  The price at which the transaction on the underlying commodity will be carried out if and when the option is exercised 
C)  The price the buyer of the option pays to the seller when entering into the options contract 
D)  The price at which the two counterparties can close-out their position

Question 4

Which is the day count/annual basis convention for SGD money market deposits?

Accepted Answer

A)  ACT/365 
B)  ACT/360 
C)  ACT/ACT 
D)  30E/360 
A)  ACT/365 
B)  ACT/360 
C)  ACT/ACT 
D)  30E/360

Question 5

The vega of an option is:

Accepted Answer

A)  The sensitivity of the option value to changes in interest rates 
B)  The sensitivity of the option value to changes in implied volatility 
C)  The sensitivity of the option value to changes in the time to expiry 
D)  The sensitivity of the option value to changes in the price of the underlying 
A)  The sensitivity of the option value to changes in interest rates 
B)  The sensitivity of the option value to changes in implied volatility 
C)  The sensitivity of the option value to changes in the time to expiry 
D)  The sensitivity of the option value to changes in the price of the underlying

Question 6

A bank wants to use STIR futures for establishing a macro hedge for the asset portfolio. Which of the following statements is correct?

Accepted Answer

A)  It is reasonable for the bank to purchase futures contracts if they expect interest rates to rise. 
B)  It is reasonable for the bank to take a long position in anticipation of rising rates. 
C)  Losses (or gains) in the value of the cash position can be largely offset by gains (or losses) in the value of the futures position 
D)  It is reasonable for the bank to sell futures contracts if it expects interest rates to fall 
A)  It is reasonable for the bank to purchase futures contracts if they expect interest rates to rise. 
B)  It is reasonable for the bank to take a long position in anticipation of rising rates. 
C)  Losses (or gains) in the value of the cash position can be largely offset by gains (or losses) in the value of the futures position 
D)  It is reasonable for the bank to sell futures contracts if it expects interest rates to fall

Question 7

Which one of the following statements about mark-to-model valuation is correct?

Accepted Answer

A)  Mark-to-model valuation is used for exchange-traded positions to ensure correct pricing. 
B)  Asset managers are not allowed to use mark-to-model valuation. 
C)  Mark-to-model valuation is used for complex financial instruments; it is always accurate and in line with potential tradable prices. 
D)  Mark-to-model valuation refers to prices determined by financial models, rather than actual market prices. 
A)  Mark-to-model valuation is used for exchange-traded positions to ensure correct pricing. 
B)  Asset managers are not allowed to use mark-to-model valuation. 
C)  Mark-to-model valuation is used for complex financial instruments; it is always accurate and in line with potential tradable prices. 
D)  Mark-to-model valuation refers to prices determined by financial models, rather than actual market prices.

Question 8

Which of the following are all goals of the originator of securitized assets?

Accepted Answer

A)  to increase funding diversification , to reduce funding costs, to achieve regulatory and accounting benefits, to increase the size of the balance sheet 
B)  to increase funding diversification , to reduce funding costs, to achieve regulatory and accounting benefits 
C)  to increase funding diversification , to reduce operational risk, to achieve regulatory and accounting benefits, to decrease the size of the balance sheet 
D)  to increase funding diversification , to reduce operational risk, to achieve regulatory and accounting benefits, to increase the size of the balance sheet 
A)  to increase funding diversification , to reduce funding costs, to achieve regulatory and accounting benefits, to increase the size of the balance sheet 
B)  to increase funding diversification , to reduce funding costs, to achieve regulatory and accounting benefits 
C)  to increase funding diversification , to reduce operational risk, to achieve regulatory and accounting benefits, to decrease the size of the balance sheet 
D)  to increase funding diversification , to reduce operational risk, to achieve regulatory and accounting benefits, to increase the size of the balance sheet

Question 9

Which of the following statements is correct?

Accepted Answer

A)  The best strategy to treat and mitigate risk is avoiding the risk by avoiding the business 
B)  The best strategy to treat and mitigate risk is transferring the risk to another party, e. g. by transfer to an insurance company 
C)  The best strategy to treat and mitigate risk is to establish the appropriate processes for identifying, assessing, managing, monitoring and reporting risks 
D)  The best strategy to treat and mitigate risk is to reduce the negative effect of the risk, e. g. by hedging 
A)  The best strategy to treat and mitigate risk is avoiding the risk by avoiding the business 
B)  The best strategy to treat and mitigate risk is transferring the risk to another party, e. g. by transfer to an insurance company 
C)  The best strategy to treat and mitigate risk is to establish the appropriate processes for identifying, assessing, managing, monitoring and reporting risks 
D)  The best strategy to treat and mitigate risk is to reduce the negative effect of the risk, e. g. by hedging

Question 10

What is the name of a swap in which the counterparties sell currencies to each other with a concomitant agreement to reverse the exchange of currencies at a fixed date in the future at the same price, and where the interest rates for the two currencies are reflected in the two exchanges but paid separately?

Accepted Answer

A)  aFXswap 
B)  an in/out swap 
C)  a currency swap 
D)  a quanto swap 
A)  aFXswap 
B)  an in/out swap 
C)  a currency swap 
D)  a quanto swap

Question 11

When a stop-loss/profit order is taken, the rate specified in the order:

Accepted Answer

A)  Must be transacted regardless of where the market moved. 
B)  Must be transacted if a broker confirms that the rate specified was reached. 
C)  Cannot be taken as a fixed-price guarantee. 
D)  None of the above. 
A)  Must be transacted regardless of where the market moved. 
B)  Must be transacted if a broker confirms that the rate specified was reached. 
C)  Cannot be taken as a fixed-price guarantee. 
D)  None of the above.

Question 12

It is June. You are over-borrowed from October to January on your deposit book. How would you hedge using FRAs?

Accepted Answer

A)  Sell 3x6 
B)  Buy 3x6 
C)  Sell 4x7 
D)  Buy 4x7 
A)  Sell 3x6 
B)  Buy 3x6 
C)  Sell 4x7 
D)  Buy 4x7

Question 13

The seller of a put option has:

Accepted Answer

A)  Substantial opportunity for gain and limited risk of loss 
B)  Substantial risk of loss and substantial opportunity for gain 
C)  Limited risk of loss and limited opportunity for gain 
D)  Substantial risk of loss and limited opportunity for gain 
A)  Substantial opportunity for gain and limited risk of loss 
B)  Substantial risk of loss and substantial opportunity for gain 
C)  Limited risk of loss and limited opportunity for gain 
D)  Substantial risk of loss and limited opportunity for gain

Question 14

Which of the following functions does a to-party repo agent not perform?

Accepted Answer

A)  It checks the eligibility and sufficiency of collateral 
B)  It can impose an initial margin on behalf of the buyer and manages margin calls 
C)  It manages substitution of collateral on behalf of the seller 
D)  It participates in the risk of transactions if one of the parties defaults 
A)  It checks the eligibility and sufficiency of collateral 
B)  It can impose an initial margin on behalf of the buyer and manages margin calls 
C)  It manages substitution of collateral on behalf of the seller 
D)  It participates in the risk of transactions if one of the parties defaults

Question 15

Under Basel rules, what is the meaning of LGD?

Accepted Answer

A)  Loss Given Default 
B)  Liquidity Given Distress 
C)  Limit Given Default 
D)  Loss Given Distress 
A)  Loss Given Default 
B)  Liquidity Given Distress 
C)  Limit Given Default 
D)  Loss Given Distress

Question 16

A 3-month (91-day) deposit of AUD 25,000,000.00 is made at 3.25%. At maturity, it is rolled over three times at 3.55% for 90 days, 4.15% for 91 days and 4.19% for 89 days. At the end of 12 months, how much is repaid (principal plus interest)?

Accepted Answer

A)  AUD 25,962,011.00 
B)  AUD 25,959,714.91 
C)  AUD 25,948,878.47 
D)  AUD 25,948,648.82 
A)  AUD 25,962,011.00 
B)  AUD 25,959,714.91 
C)  AUD 25,948,878.47 
D)  AUD 25,948,648.82

Question 17

You quote a price to a broker on EUR 100 million. Your price is hit for EUR 50 million. What does the Model Code say about this situation?

Accepted Answer

A)  You have a right to qualify your quotes in terms of amounts, if you do so when you make the price. 
B)  You have a right to qualify your quotes in terms of amounts, provided the amounts are marketable. 
C)  You have a right to qualify your quotes in terms of amounts, once you have discovered the name of the counterparty for credit reasons. 
D)  You have a right to qualify your quotes in terms of amounts. 
A)  You have a right to qualify your quotes in terms of amounts, if you do so when you make the price. 
B)  You have a right to qualify your quotes in terms of amounts, provided the amounts are marketable. 
C)  You have a right to qualify your quotes in terms of amounts, once you have discovered the name of the counterparty for credit reasons. 
D)  You have a right to qualify your quotes in terms of amounts.

Question 18

Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 50,000,000.00. EONIA is 0.375% and the ECB marginal lending facility rate is 1.50%. Applying conventional administration fees, how much will this be charged?

Accepted Answer

A)  EUR 620.83 
B)  EUR 868.06 
C)  EUR 968.06 
D)  EUR 2,183.33 
A)  EUR 620.83 
B)  EUR 868.06 
C)  EUR 968.06 
D)  EUR 2,183.33

Question 19

Using the following rates: 3M (90-day) EUR deposit     0.25% 6M (180-day) EUR deposit     0.50% What is the rate for a EUR deposit, which runs from 3 to 6 months?

Accepted Answer

A)  0.25% 
B)  0.375% 
C)  0.75% 
D)  0.50% 
A)  0.25% 
B)  0.375% 
C)  0.75% 
D)  0.50%

Question 20

A put option is 'out-of-the-money' if:

Accepted Answer

A)  Its strike price is higher than the current market price of the underlying commodity 
B)  If the current market price of the underlying commodity is higher than the strike price of the option 
C)  Its strike price is equal to the current market price of the underlying commodity 
D)  If the current market price of the underlying commodity is lower than the strike price of the option 
A)  Its strike price is higher than the current market price of the underlying commodity 
B)  If the current market price of the underlying commodity is higher than the strike price of the option 
C)  Its strike price is equal to the current market price of the underlying commodity 
D)  If the current market price of the underlying commodity is lower than the strike price of the option

Taking collateral to hedge the credit risk on a counterparty means that you have:

A 6-month SEK/NOK Swap is quoted 40/50. Spot is 1.1145. Which of the following statements is correct?

The premium on an option contract is:

Which is the day count/annual basis convention for SGD money market deposits?

The vega of an option is:

A bank wants to use STIR futures for establishing a macro hedge for the asset portfolio. Which of the following statements is correct?

Which one of the following statements about mark-to-model valuation is correct?

Which of the following are all goals of the originator of securitized assets?

Which of the following statements is correct?

When a stop-loss/profit order is taken, the rate specified in the order:

It is June. You are over-borrowed from October to January on your deposit book. How would you hedge using FRAs?

The seller of a put option has:

Which of the following functions does a to-party repo agent not perform?

Under Basel rules, what is the meaning of LGD?

A 3-month (91-day) deposit of AUD 25,000,000.00 is made at 3.25%. At maturity, it is rolled over three times at 3.55% for 90 days, 4.15% for 91 days and 4.19% for 89 days. At the end of 12 months, how much is repaid (principal plus interest)?

You quote a price to a broker on EUR 100 million. Your price is hit for EUR 50 million. What does the Model Code say about this situation?

Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 50,000,000.00. EONIA is 0.375% and the ECB marginal lending facility rate is 1.50%. Applying conventional administration fees, how much will this be charged?

Using the following rates: 3M (90-day) EUR deposit 0.25% 6M (180-day) EUR deposit 0.50% What is the rate for a EUR deposit, which runs from 3 to 6 months?

A put option is 'out-of-the-money' if:

ACI Dealing Certificate-Part A

Filters

Exam 2: ACI Dealing Certificate-Part B

Taking collateral to hedge the credit risk on a counterparty means that you have:

A 6-month SEK/NOK Swap is quoted 40/50. Spot is 1.1145. Which of the following statements is correct?

The premium on an option contract is:

Which is the day count/annual basis convention for SGD money market deposits?

The vega of an option is:

A bank wants to use STIR futures for establishing a macro hedge for the asset portfolio. Which of the following statements is correct?

Which one of the following statements about mark-to-model valuation is correct?

Which of the following are all goals of the originator of securitized assets?

Which of the following statements is correct?

When a stop-loss/profit order is taken, the rate specified in the order:

It is June. You are over-borrowed from October to January on your deposit book. How would you hedge using FRAs?

The seller of a put option has:

Which of the following functions does a to-party repo agent not perform?

Under Basel rules, what is the meaning of LGD?

A 3-month (91-day) deposit of AUD 25,000,000.00 is made at 3.25%. At maturity, it is rolled over three times at 3.55% for 90 days, 4.15% for 91 days and 4.19% for 89 days. At the end of 12 months, how much is repaid (principal plus interest)?

You quote a price to a broker on EUR 100 million. Your price is hit for EUR 50 million. What does the Model Code say about this situation?

Your agent bank accepts your back-valuation request for 1 day on an amount of EUR 50,000,000.00. EONIA is 0.375% and the ECB marginal lending facility rate is 1.50%. Applying conventional administration fees, how much will this be charged?

Using the following rates: 3M (90-day) EUR deposit 0.25% 6M (180-day) EUR deposit 0.50% What is the rate for a EUR deposit, which runs from 3 to 6 months?

A put option is 'out-of-the-money' if:

ACI Dealing Certificate-Part A

Filters