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Automated trading systems for interbank spot FX display the best prices entered into the systems by users and:


A) Display the names of those users along their prices
B) Offer pre-trade anonymity to users quoting prices
C) Offer pre and post-trade anonymity to users quoting prices
D) Offer users the choice of whether to remain anonymous

E) A) and B)
F) B) and C)

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A CD with a face value of EUR 10,000,000.00 and a coupon of 3% was issued at par for 182 days and is now trading at 3.10% with 120 days remaining to maturity. What has been the capital gain or loss since issue?


A) -EUR 52,161.00
B) -t-EUR 47,839.00
C) -EUR 3,827.67
D) Nil

E) A) and B)
F) A) and C)

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Dealers are allowed to trade for their own account only if:


A) they have good track records in dealing both for their institution and for themselves
B) there have been no previous conflicts of interest in the dealing room
C) there is a clearly defined and written policy about the matter
D) the dealers see no conflict of interest in such dealing

E) A) and D)
F) B) and C)

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You are the fixed-rate payer in a plain vanilla interest rate swap. If your counterparty defaults, your exposure at default is:


A) greater, the higher the market swap rate and the shorter the term
B) lower, the lower the market swap rate and the shorter the term
C) lower, the lower the market swap rate and the longer the term
D) greater, the higher the market swap rate and the longer the term

E) None of the above
F) A) and B)

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Which of the following is true?


A) The 3-month Sterling (SHORT STERLING) futures contract has a basis point value of GBP 25.00 and a face value of GBP 1,000,000 .00
B) The EUROYEN TIBOR futures contract has a basis point value of JPY 25,000 and a face value of JPY 1,000,000,000
C) The CME EURODOLLAR futures contract has a minimum price interval of one-quarter basis point value (0.0025) for the nearest contract
D) The 3-month EURIBOR futures contract has a minimum price interval of half a basis point value (0.0050) for the nearest contract

E) B) and D)
F) C) and D)

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If you lend for 3 months and borrow for 6 months, you may be said to:


A) Be over-lent
B) Have a negative gap
C) Be exposed to higher interest rates
D) Be over-borrowed

E) A) and C)
F) A) and B)

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Which of the following statements about Eurodollar deposits is correct?


A) Eurodollar deposits can only be dealt by banks in the USA
B) US withholding tax applies to Eurodollar deposits
C) Eurodollar deposits are free of US reserve requirements
D) Eurodollar deposits are subject to US exchange controls

E) A) and B)
F) A) and D)

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A customer would hedge a currency exposure with a forward FX time option if:


A) he is unsure about the presence of a currency risk
B) the amount of the currency risk is not precisely known in advance
C) his currency risk might change over time
D) the precise maturity of the currency risk is not known

E) C) and D)
F) None of the above

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In the deposit broker market, which one of the following is not a valid reason for the proposed borrower to decline the lenders name?


A) In the case of short date deposits, if the borrower is not prepared to repay the deposit prior to notice of receipt of the funds from the correspondent bank.
B) The borrower has no lending line for the placer of the funds and does not wish to be embarrassed by being unable to reciprocate.
C) If he secures a better rate elsewhere.
D) The borrower would be in breach of internal or regulatory depositor concentration limitations.

E) A) and B)
F) All of the above

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What is the expression used to describe a genuine error (wrong amount, wrong side, wrong rate) made by a dealer in the execution of an order on an electronic platform?


A) mis-stroke
B) slip-bid
C) mis-hit
D) broken trade

E) None of the above
F) All of the above

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If the value date of a forward USD/JPY transaction is declared a holiday in either New York or Tokyo, the correct value date will be:


A) the value date of the financial centre that is open
B) the next business day of the financial centre which is closed
C) the next business day when both New York and Tokyo are open
D) the previous business day when both New York and Tokyo are open

E) C) and D)
F) B) and D)

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3-month EUR/USD FX swaps are quoted to you at 8/12. If the "points are in your favor", what have you done?


A) Bought and sold 3-month EUR/USD through the swap
B) Sold and bought 3-month EUR/USD through the swap
C) Made the quote
D) Cannot say

E) A) and B)
F) A) and C)

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An option premium is a positive function of:


A) Time to expiry
B) The volatility of the price of the underlying commodity
C) The moneyness of the option
D) All of the above

E) A) and C)
F) None of the above

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What is the Overnight Index for EUR?


A) EURIBOR
B) EONIA
C) EUREPO
D) EURONIA

E) C) and D)
F) A) and B)

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If you funded your fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?


A) Pay fixed and receive floating through swaps for the term of the portfolio
B) Pay floating and receive fixed through swaps for the term of the portfolio
C) You cannot: the maturity of the swaps would be longer than that of the deposits
D) You should not: there would be too much basis risk

E) None of the above
F) A) and D)

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When performing a gap analysis, into which of the following time buckets should a 5-year floating-rate note with a 6-month LIBOR coupon be slotted?


A) the 6-month bucket
B) the 2.5-year bucket
C) the 5-year bucket
D) It should be weighted and apportioned in each of the time buckets in accord with the periodic coupon payments.

E) A) and C)
F) All of the above

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The market is quoting: 1-month (30-day) GBP     0.47% 7-month (213-day) GBP     0.74% What is the 1x7 rate in GBP?


A) 0.7956%
B) 0.7946%
C) 0.7840%
D) 0.7732%

E) B) and C)
F) All of the above

Correct Answer

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If the yield curve is upward sloping, a bank would not profit from:


A) borrowing short and lending long
B) borrowing long and lending short
C) paying a higher rate on deposits than the market
D) increasing the banks leverage

E) None of the above
F) A) and B)

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The primary issue for insuring prudent liquidity management in accord with the guidance provided by the Basel Committee (Basel II I Basel III) is:


A) Tier 3 capital requirements held against liquidity risk.
B) The nature and amount of high quality liquid assets a bank holds.
C) Central bank internal management processes regarding open market operations.
D) The transparent disclosure of illiquid on-balance sheet liabilities.

E) C) and D)
F) B) and C)

Correct Answer

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You have taken 3-month deposits of EUR 10,000,000.00 at 0.60%, EUR 5,000,000.00 at 0.40% and EUR 5,000,000.00 at 0.50%. What is the average rate of your long position?


A) 0.525%
B) 0.45%
C) 0.75%
D) 0.375%

E) A) and B)
F) B) and C)

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