Question 1

What is the Overnight Index for GBP?

Accepted Answer

A)  SONIA 
B)  STINA 
C)  STONIA 
D)  EONIA 
A)  SONIA 
B)  STINA 
C)  STONIA 
D)  EONIA

Question 2

What happens when a coupon is paid on bond collateral during the term of a sell/buy-back?

Accepted Answer

A)  Nothing 
B)  A margin call is triggered on the seller 
C)  A manufactured payment is made to the seller 
D)  The equivalent value plus reinvestment income is deducted from the repurchase price 
A)  Nothing 
B)  A margin call is triggered on the seller 
C)  A manufactured payment is made to the seller 
D)  The equivalent value plus reinvestment income is deducted from the repurchase price

Question 3

You have written a EUR/USD knock-in option for a bank counterparty. At 6pm New York time on Friday, the instrike point is breached. This is confirmed on screens. The counterparty contacts you to confirm that the option has been knocked in.

Accepted Answer

A)  The deal is done. You should confirm with your counterparts. 
B)  If the knock-in is confirmed by a New York price source, the deal is done and you should confirm with your counterparty. 
C)  The recognised closing time for the currency markets is 6:00pm New York time in Friday, so the deal is done and you should confirm with your counterparty. 
D)  The recognised closing time for the currency markets is 5:00pm NewYork time in Friday, so no deal is done. 
A)  The deal is done. You should confirm with your counterparts. 
B)  If the knock-in is confirmed by a New York price source, the deal is done and you should confirm with your counterparty. 
C)  The recognised closing time for the currency markets is 6:00pm New York time in Friday, so the deal is done and you should confirm with your counterparty. 
D)  The recognised closing time for the currency markets is 5:00pm NewYork time in Friday, so no deal is done.

Question 4

Bank XYZ calls you for a quote in EUR/USD for EUR 50,000,000.00. If you decide to quote, which of the following is true?

Accepted Answer

A)  You must be prepared to deal EUR 50,000,000.00. 
B)  You may quote without stating the amount you are prepared to deal. 
C)  You are only committed to deal in a marketable amount. 
D)  You must be prepared to deal for more than EUR 50,000,000.00 in case Bank XYZ wishes to. 
A)  You must be prepared to deal EUR 50,000,000.00. 
B)  You may quote without stating the amount you are prepared to deal. 
C)  You are only committed to deal in a marketable amount. 
D)  You must be prepared to deal for more than EUR 50,000,000.00 in case Bank XYZ wishes to.

Question 5

A forward-forward lender has an exposure to the risk of:

Accepted Answer

A)  Higher interest rates 
B)  Lower interest rates 
C)  Flattening yield curve 
D)  Parallel shift downwards in the yield curve 
A)  Higher interest rates 
B)  Lower interest rates 
C)  Flattening yield curve 
D)  Parallel shift downwards in the yield curve

Question 6

What is the documentation in which the parties agree to the terms that will govern future transactions?

Accepted Answer

A)  standard settlement instructions 
B)  netting agreement 
C)  terms of engagement 
D)  master agreement 
A)  standard settlement instructions 
B)  netting agreement 
C)  terms of engagement 
D)  master agreement

Question 7

Which of the following statements about "standard settlement instructions" (SSI) is correct?

Accepted Answer

A)  The Head of Operations has the sole responsibility of ensuring the correctness and validity of the SSI set up. 
B)  SSIs should be stored and maintained in the bank's general static data system. 
C)  Each institution should have a separate SSI team to prevent I minimise the potential risk of fraud. 
D)  SSI staff should be fully integrated within Operations to insure consistent and reliable settlement guidelines. 
A)  The Head of Operations has the sole responsibility of ensuring the correctness and validity of the SSI set up. 
B)  SSIs should be stored and maintained in the bank's general static data system. 
C)  Each institution should have a separate SSI team to prevent I minimise the potential risk of fraud. 
D)  SSI staff should be fully integrated within Operations to insure consistent and reliable settlement guidelines.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  Unilateral collateral obligations to sovereign counterparties provide liquidity to banks. 
B)  Under Basel III commercial banks are most likely to incur lower costs to service their sovereign clients. 
C)  While banks usually do not call for collateral from sovereign counterparties, they must provide collateral for the offsetting hedge transactions which are undertaken with commercial counterparties. 
D)  Uncollateralised exposures to sovereign counterparties will not require additional regulatory capital to be set aside against potential credit losses 
A)  Unilateral collateral obligations to sovereign counterparties provide liquidity to banks. 
B)  Under Basel III commercial banks are most likely to incur lower costs to service their sovereign clients. 
C)  While banks usually do not call for collateral from sovereign counterparties, they must provide collateral for the offsetting hedge transactions which are undertaken with commercial counterparties. 
D)  Uncollateralised exposures to sovereign counterparties will not require additional regulatory capital to be set aside against potential credit losses

Question 9

One or your brokers asks you to buy and sell EUP/USD at the same price net of brokerage in order to allow him to clear a transaction.

Accepted Answer

A)  You must have prior senior management approval. 
B)  You must have the authority to switch names. 
C)  You must execute such transactions as promptly as possible within policy guidelines 
D)  All of the above. 
A)  You must have prior senior management approval. 
B)  You must have the authority to switch names. 
C)  You must execute such transactions as promptly as possible within policy guidelines 
D)  All of the above.

Question 10

What does the Model Code recommend in respect of prices and orders made on electronic trading platforms?

Accepted Answer

A)  They must be posted with a clear intent to be tradable. 
B)  They must be identified as indicative rates only. 
C)  They must be posted subject to later credit line approval. 
D)  They need not be posted in an appropriate trading style. 
A)  They must be posted with a clear intent to be tradable. 
B)  They must be identified as indicative rates only. 
C)  They must be posted subject to later credit line approval. 
D)  They need not be posted in an appropriate trading style.

Question 11

Which of the following transactions would have the effect of lengthening the average duration of assets in the banking book?

Accepted Answer

A)  buying futures contracts on 30-year German Government bonds 
B)  selling futures contracts on 30-year German Government bonds 
C)  buying put options on 30-year German Government bonds 
D)  buying a 3x6 forward rate agreement 
A)  buying futures contracts on 30-year German Government bonds 
B)  selling futures contracts on 30-year German Government bonds 
C)  buying put options on 30-year German Government bonds 
D)  buying a 3x6 forward rate agreement

Question 12

A negative yield curve is one in which:

Accepted Answer

A)  Longer rates are lower than short rates 
B)  Forward exchange rates are at a discount 
C)  Short term rates are lower than long 
D)  Forward exchange rates are a premium 
A)  Longer rates are lower than short rates 
B)  Forward exchange rates are at a discount 
C)  Short term rates are lower than long 
D)  Forward exchange rates are a premium

Question 13

The exercise price in an option contract is:

Accepted Answer

A)  The price of the underlying instrument at the time of the transaction 
B)  The price at which the transaction on the underlying instrument 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 instrument at the time of the transaction 
B)  The price at which the transaction on the underlying instrument 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 14

The two-week repo rate for the 5.25% Bund 2011 is quoted to you at 3.33-38%. You agree to reverse in bonds worth EUR 266,125,000.00, but insist on an initial margin of 2%. You would earn repo interest of:

Accepted Answer

A)  EUR 337,874A0 
B)  EUR 342,947.58 
C)  EUR 337,739.24 
D)  EUR 342,810.40 
A)  EUR 337,874A0 
B)  EUR 342,947.58 
C)  EUR 337,739.24 
D)  EUR 342,810.40

Question 15

Which of the following is true?

Accepted Answer

A)  It is the responsibility of the broking firm to conduct due diligence before transacting a deal. 
B)  All principals have the responsibility for assessing the creditworthiness of their counterparties or potential counterparties whether dealing direct or through a broking firm. 
C)  The principal is obliged to take into account any information provided by a broker as they are bound by a professional relationship. 
D)  All of the above. 
A)  It is the responsibility of the broking firm to conduct due diligence before transacting a deal. 
B)  All principals have the responsibility for assessing the creditworthiness of their counterparties or potential counterparties whether dealing direct or through a broking firm. 
C)  The principal is obliged to take into account any information provided by a broker as they are bound by a professional relationship. 
D)  All of the above.

Question 16

A 1-month (30-day) USCP with a race value of USD 5 million is quoted at a rate of discount of 2.31%. How much is the paper worth?

Accepted Answer

A)  USD 4,884,500.00 
B)  USD 4,990,375.00 
C)  USD 4,990.506.85 
D)  USD 4,990,393.49 
A)  USD 4,884,500.00 
B)  USD 4,990,375.00 
C)  USD 4,990.506.85 
D)  USD 4,990,393.49

Question 17

VaR increases with:

Accepted Answer

A)  lower correlation of underlying risk factors 
B)  a shorter time horizon 
C)  a lower confidence level 
D)  a higher confidence level 
A)  lower correlation of underlying risk factors 
B)  a shorter time horizon 
C)  a lower confidence level 
D)  a higher confidence level

Question 18

Which one of the following statements is incorrect? Hedge accounting of an existing position no longer applies when:

Accepted Answer

A)  the trader acquires additional exposure in the hedged item. 
B)  the hedging instrument is sold, terminated or exercised. 
C)  the hedged item is sold or settled. 
D)  a hedge fails the effectiveness test. 
A)  the trader acquires additional exposure in the hedged item. 
B)  the hedging instrument is sold, terminated or exercised. 
C)  the hedged item is sold or settled. 
D)  a hedge fails the effectiveness test.

Question 19

Where sale and repurchase agreements or stock borrowing or lending transactions are entered into:

Accepted Answer

A)  screen services, brokers and other third party providers can all be useful sources of data 
B)  For periods less than one month, the maturity date will be the first date that is a business day that is within one, seven, fourteen days from the value date, but when near the month end must never be a date in the next calendar month 
C)  Inter-dealer brokers or the automated trading system need not be notified when participants attempt to utilize odd settlement dates 
D)  It is not recommended that legal opinion should be obtained on the enforceability of the contract 
A)  screen services, brokers and other third party providers can all be useful sources of data 
B)  For periods less than one month, the maturity date will be the first date that is a business day that is within one, seven, fourteen days from the value date, but when near the month end must never be a date in the next calendar month 
C)  Inter-dealer brokers or the automated trading system need not be notified when participants attempt to utilize odd settlement dates 
D)  It is not recommended that legal opinion should be obtained on the enforceability of the contract

Question 20

An Overnight Indexed Swap (OIS) is:

Accepted Answer

A)  A fixed-floating money market swap in which the floating rate is an overnight index fixed periodically over the term of the swap 
B)  A fixed-floating money market swap in which the floating rate is the mean of the overnight index over the term of the swap 
C)  A fixed-floating money market swap in which the floating rate is an overnight index compounded daily 
D)  A floating-for-floating rate swap in different currencies in which both floating rates are overnight indexes compounded daily 
A)  A fixed-floating money market swap in which the floating rate is an overnight index fixed periodically over the term of the swap 
B)  A fixed-floating money market swap in which the floating rate is the mean of the overnight index over the term of the swap 
C)  A fixed-floating money market swap in which the floating rate is an overnight index compounded daily 
D)  A floating-for-floating rate swap in different currencies in which both floating rates are overnight indexes compounded daily

What is the Overnight Index for GBP?

What happens when a coupon is paid on bond collateral during the term of a sell/buy-back?

You have written a EUR/USD knock-in option for a bank counterparty. At 6pm New York time on Friday, the instrike point is breached. This is confirmed on screens. The counterparty contacts you to confirm that the option has been knocked in.

Bank XYZ calls you for a quote in EUR/USD for EUR 50,000,000.00. If you decide to quote, which of the following is true?

A forward-forward lender has an exposure to the risk of:

What is the documentation in which the parties agree to the terms that will govern future transactions?

Which of the following statements about "standard settlement instructions" (SSI) is correct?

Which of the following statements is correct?

One or your brokers asks you to buy and sell EUP/USD at the same price net of brokerage in order to allow him to clear a transaction.

What does the Model Code recommend in respect of prices and orders made on electronic trading platforms?

Which of the following transactions would have the effect of lengthening the average duration of assets in the banking book?

A negative yield curve is one in which:

The exercise price in an option contract is:

The two-week repo rate for the 5.25% Bund 2011 is quoted to you at 3.33-38%. You agree to reverse in bonds worth EUR 266,125,000.00, but insist on an initial margin of 2%. You would earn repo interest of:

Which of the following is true?

A 1-month (30-day) USCP with a race value of USD 5 million is quoted at a rate of discount of 2.31%. How much is the paper worth?

VaR increases with:

Which one of the following statements is incorrect? Hedge accounting of an existing position no longer applies when:

Where sale and repurchase agreements or stock borrowing or lending transactions are entered into:

An Overnight Indexed Swap (OIS) is:

ACI Dealing Certificate-Part A

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Exam 2: ACI Dealing Certificate-Part B

What is the Overnight Index for GBP?

What happens when a coupon is paid on bond collateral during the term of a sell/buy-back?

You have written a EUR/USD knock-in option for a bank counterparty. At 6pm New York time on Friday, the instrike point is breached. This is confirmed on screens. The counterparty contacts you to confirm that the option has been knocked in.

Bank XYZ calls you for a quote in EUR/USD for EUR 50,000,000.00. If you decide to quote, which of the following is true?

A forward-forward lender has an exposure to the risk of:

What is the documentation in which the parties agree to the terms that will govern future transactions?

Which of the following statements about "standard settlement instructions" (SSI) is correct?

Which of the following statements is correct?

One or your brokers asks you to buy and sell EUP/USD at the same price net of brokerage in order to allow him to clear a transaction.

What does the Model Code recommend in respect of prices and orders made on electronic trading platforms?

Which of the following transactions would have the effect of lengthening the average duration of assets in the banking book?

A negative yield curve is one in which:

The exercise price in an option contract is:

The two-week repo rate for the 5.25% Bund 2011 is quoted to you at 3.33-38%. You agree to reverse in bonds worth EUR 266,125,000.00, but insist on an initial margin of 2%. You would earn repo interest of:

Which of the following is true?

A 1-month (30-day) USCP with a race value of USD 5 million is quoted at a rate of discount of 2.31%. How much is the paper worth?

VaR increases with:

Which one of the following statements is incorrect? Hedge accounting of an existing position no longer applies when:

Where sale and repurchase agreements or stock borrowing or lending transactions are entered into:

An Overnight Indexed Swap (OIS) is:

ACI Dealing Certificate-Part A

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