3I0-012 Sample Questions Answers

anywhere, even away from their own dealing premises

after-hours, but only if listed as such by management

after-hours, but only from their private residence

away from their broker’s dealing premises

An increase in forward USD/CHF

Falling CI-IF interest rates

A decrease in forward USD/CHF

Rising CHF interest rates

Volume-weighted average overnight EUR deposit rate

Volume-weighted average overnight EUR LIBOR

Arithmetic average overnight EUR deposit rate

ECB overnight lending rate

Prices quoted by brokers should be taken to be firm in marketable amounts unless otherwise qualified

Prices quoted by brokers should be taken to be indicative in marketable amounts unless otherwise qualified

Prices quoted by brokers should be taken to be firm in amounts of 1,000,000.00 of the quoted currency unless otherwise qualified

Prices quoted by brokers should be taken to be indicative in amounts of 1,000,000.00 of the base currency unless otherwise qualified

EUR 50,015,416.67

EUR 50,016,219.18

EUR 50,016,444.44

EUR 50,016,958.33

Intrinsic value but no time value

Time value but no intrinsic value

Both time value and intrinsic value

Neither time value nor intrinsic value

1.2232

1.2233

1.2234

1.2267

Counterparty risk and operational risk

Counterparty risk and legal risk

Collateral illiquidity and counterparty risk

Collateral illiquidity and legal risk

EUR 1,388,89

EUR 1,561.11

EUR 2,255.56

EUR 2,951.39

The buyer

The seller

Neither

Both

should never reveal their future dealing intentions to their counterparties

should make clear their intention to do so when initially negotiating the deal

should agree upon the method of assignment before transacting

should only reveal any such intentions after the confirmations have been exchanged

Short USD 1.5 million at 130.46

Long USD 1.5 million at 130.46

Short USD 1.5 million at 131.60

Long USD 1.5 million at 131.60

At that price

At that price in a marketable amount

At that price in a marketable amount, provided the counterparty’s name is acceptable

At that price in a marketable amount, provided the counterparty’s name is acceptable and the market price has not moved excessively

to promote globalization and deregulation of the financial markets

to maintain the professional level of competence and to disseminate a high level of ethical and professional behavior

to act as the official international market regulator in the absence of government regulation

to become the sole global corporation of wholesale financial market professionals

1.3042-1.30435

1.30405-1.3045

1.30095-1.3011

1.4575- 1.4728

When one of the principals confirms the deal

When the principals give a written undertaking for all deals done at the end of the day

When acknowledgement is received from the principals that the deal is done

When both back offices acknowledge the deal

A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days.

A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days.

A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days.

A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

The buyer to each seller and the seller to each buyer

A clearing agent only

The self-regulatory organization for the futures exchange

The owner of the futures exchange

for a short length of time, usually 30 seconds

until the price has been taken “off” by the dealer

for a short length of time, typically a matter of seconds

for a minute or two

The market value of bond collateral at the start of the repo at the clean price of the bond

The market value of bond collateral at the start of the repo at the dirty price of the bond

The amount of cash actually paid for collateral at the start of the repo

The amount of cash actually paid for collateral at the start of the repo plus repo interest

more liabilities than assets will be reprised in the near term

more assets than liabilities will be reprised in the near term

more assets than liabilities have variable rates or short residual maturities

non-interest bearing liabilities are greater than non-interest bearing assets

149.66-74

149.69-71

63.52-53

63.51-54

Borrowed CAD 20,000,000.00 at 1.06%

Lent CAD 20,000,000.00 at 1.11%

Borrowed CAD 20,000,000.00 at 1.11%

Lent CAD 20,000,000.00 at 1.06%

The transaction should be concluded and the broker should inform both counterparties accordingly.

The dealer who hits the broker’s price may decide whether the deal is done or not; the broker should inform both counterparties accordingly.

The deal should not be concluded and the broker should inform both counterparties accordingly.

The broker should immediately inform both counterparties that the deal will have to berenegotiated.

visit a broker’s dealing room to arrange or confirm deals

visit a broker’s dealing room with the permission of the management of both parties

deal from within a broker’s dealing room with the permission of the broker’s management

place an order with a broker from within the same broker’s office

1.3159

1.3158

1.3142

1.3230

Selling a FRA for a similar notional amount

Buying a FRA for a similar notional amount

Selling a call option on the contract

Selling a put option on the contract

Delivery repo

HIC repo

TO-party repo

There is no real difference

The 10th of March, June, September and December.

The third Wednesdays of January, April, July and October.

The Mondays before the third Wednesdays of March, June, September and December.

The third Wednesdays of March, June, September and December.

Nil

A profit of EUR 16,847.58

A loss

A profit of EUR 18,166.05

A contract to exchange one stream of income payments for another

A temporary exchange of one deposit for another of a longer maturity in the same currency

A forward-forward contract

All of the above

one day after the deal is done

within two hours of the trade being booked and as soon as technologically possible

immediately after having received the confirmation of the counterparty

no later than the value date of the first leg of the transaction

bilaterally cleared ABS trades only

exchange traded derivatives only

derivatives cleared via a CCP

bilaterally settled OTC derivatives trades

a potential buyer of EUR against RUB

speculating on an appreciation of the Russian Rouble

expecting rising EUR/RUB exchange rates

a seller of Russian Rouble

1.4323-26

1.4320-25

1.4315-20

1.4318-23

It reduces operational risk.

It splits differences arising from failed settlement between the two counterparties.

It removes the need for sending out SWIFT payment authorisations.

All of the above.

Margin maintenance

Re-pricing

Either of the above, but usually (a)

Either of the above, but usually (b)

27th December

30th December

31stDecember

1st January

1.299971

1.309966

1.309971

1.310029

Substantial opportunity for gain and limited risk of loss

Substantial risk of loss and substantial opportunity for gain

Limited risk of loss and limited opportunity for gain

Substantial risk of loss and limited opportunity for gain

greater, the higher the coupon and the longer the term

greater, the lower the coupon and the longer the term

lower, the lower the coupon and the shorter the term

lower, the higher the coupon and the longer the term

Unchanged

Move towards 28/31

Move towards 5 7/60

Insufficient information

Profiles for functions are encouraged and should be reviewed semi-annually by a manager.

Developers should have unrestricted access to production systems.

Access to production systems should be rigorously controlled.

Users should not have access to change system functionalities.

4.05%

4.0%

3.891%

3.838%

at least two months

one year

up to one month

at least three months

minimum tier 1 capital of 4.5% and minimum total capital plus a conservation buffer of 10.5%

minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 8%

minimum tier 1 capital of 4% and minimum total capital including conservation buffer of 10.5%

minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 10.5%

0.300%

0.946%

1.935%

1.835%

Brokers should only show the names of banks to counterparties who have prime credit ratings.

Brokers should only show the names of banks to counterparties who provide good liquidity to the brokered market.

Brokers should only show the names of banks to counterparties whom they know well.

Brokers should only show the names of bank counterparties if both sides display a serious intention to transact

To confirm an FX transaction

To advise the netting position of a currency in NDFS

To advise changes in SSIs

To confirm a MM transaction

Higher interest rates

Lower interest rates

Flattening yield curve

Parallel shift downwards in the yield curve

Nostro reconciliations, the Cash Management Department and Operations

Front Office, the Cash Management Department and Operations

Front Office, Nostro reconciliations and Operations

Front Office, Nostro reconciliations and the Cash Management Department

0.9278-73

1.0784-78

1.0778-84

1,0773-78

the name of Bank A and Bank B

the names of Bank B and Bank C

the amount that was bid but not the name of Bank A

the amount taken by Bank C as well as the amount that was bid

You are committed to sell a marketable EUR amount unless the quote was for a specific amount.

You are committed to sell to the counterparty his full EUR amount subject to credit limits on the counterparty.

You are committed to sell EUR up to the amount permitted by your credit limits on the counterparty.

You are committed to sell a marketable USD amount unless the quote was for a specific amount.

0%

15%

20%

75%

6.5825

6.5820

6.5815

6.5830

The parking of deals or positions with any counterparty is discouraged B. The parking of deals or positions with any counterparty should be forbidden

The parking of deals or positions should be subject to a clear policy laid down in writing by senior management

In jurisdictions where position parking is allowed, prior approval should be sought from the regulator

It is reasonable for the bank to purchase futures contracts if they expect interest rates to rise.

It is reasonable for the bank to take a long position in anticipation of rising rates.

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

It is reasonable for the bank to sell futures contracts if it expects interest rates to fall

XAU

XAG

XPT

XPD

the expected loss on the portfolio in the worst 95% of cases

the expected loss in those cases where the loss exceeds the VaR at the 95% level

the maximum loss in those cases where the loss exceeds the VaR at the 95% level

the expected loss in those cases where the loss exceeds the VaR at the 5% level

Net interest income would increase slightly.

Net interest income would increase considerably.

Net interest income would decrease.

Net interest income would hardly change at all.

All investigation cases should be handled within the same day B. All investigation cases should be handled within 2 days

Investigation cases received before noon should be handled within the same day and those received after midday should be handled before noon the next day

Investigation cases received before noon should be handled within the same day and those received after midday within 24 hours

The quoted rate is subject to change at the risk of the price-taker

The quoting bank is reminding you of the market risk of your potential trade

This is a requirement of any market maker

The market maker needs to check your credit limit

Covenants are clauses in bank credit agreements and bond indentures designed to assure debt holders that the creditworthiness of the borrower(s)/issuer(s) will remain satisfactory

Covenants must be tailored to reflect the specific needs of the borrower/issuer and the specific risks perceived by the debt holders.

Covenants require the holder of the debt to refrain from doing certain specific things.

Three different types of covenants in credit agreements and bond indentures are affirmative, negative and financial.

Not under any circumstances, since the “parking” of deals or positions should be prohibited

in conditions of exceptional volatility

only if the two counterparties to the deal agree

only if “parking” of deals or positions has been approved by senior management

Margin maintenance

Re-pricing

Margin maintenance or re-pricing, but usually margin maintenance

Margin maintenance or re-pricing, but usually re-pricing

MTn99

MT300

MT370

MT670/671

any dealer as long as he/she is not a party to the trade

staff in the back-office/operations who are independent of the trade

staff in the dealing room who are not dealing

any staff outside the dealing room

BBA LIBOR

Fed funds

ISDALIBOR

EURIBOR

You will have to pay USD 312.50

You will receive USD 312.50

You will have to pay USD 3,125.00

You will receive USD 3,125.00

The Model Code emphasizes the importance of clear, concise documentation and on-going lines of communication.

Bank management must guarantee a fixed price execution to the counterparty.

The Model Code recommends that only experienced dealers should be allowed to take such orders.

Bank staff must secure the approval of the counterparty’s management to accept such orders.

An exchange of two streams of interest payments in different currencies and an exchange of the principal amounts of those currencies at maturity

A spot sale (purchase) and a forward purchase (sale) of two currencies agreed simultaneously between two parties

An exchange of currencies on a date beyond spot and at a price fixed today

An agreement to buy (sell) an amount of base currency value spot and simultaneously resell (buy back) the same amount to the same counterpart value today

1.4206

1.4215

1.4217

1.4225

selling holdings of 30-year German Government bonds

replacing retail savings accounts with 3-month borrowings under repo

selling futures contracts on 30-year German Government bonds

placing a 20-year covered bond in the market

The best strategy to treat and mitigate risk is avoiding the risk by avoiding the business

The best strategy to treat and mitigate risk is transferring the risk to another party, e. g. by transfer to an insurance company

The best strategy to treat and mitigate risk is to establish the appropriate processes for identifying, assessing, managing, monitoring and reporting risks

The best strategy to treat and mitigate risk is to reduce the negative effect of the risk, e. g. by hedging

the issuer of a payment for the relevant trade distinct from the counterparty

the issuer of a payment for the relevant trade identical to the counterparty

the recipient of a payment for the relevant trade distinct from the counterparty

the recipient of a payment for the relevant trade identical to the counterparty

Eurodollar deposits can only be dealt by banks in the USA

US withholding tax applies to Eurodollar deposits

Eurodollar deposits are free of US reserve requirements

Eurodollar deposits are subject to US exchange controls

Gradual positive slope

Steep positive slope

Flat

Inverted

Transaction exposure

Translation exposure

Economic exposure

None

Hedging a long bond position with payer’s swap involves basis risk

Hedging the credit risk of an asset swap package with a credit default swap has no basis risk

Basis risk is a result only of maturity mismatches

Basis risk is a result only of duration mismatches.

1.0448

1.0402

1.0397

1.0392

EUR 10,000,500.00

EUR 10,000,486.11

EUR 11,260,563.00

EUR 11,260,547.36

A forward-forward rate of 0.685%

A forward-forward rate of 0.315%

Current 3-month LIBOR of 0.6850%

Current 3-month LIBOR of 0.3150%

European-style option

American-style option

Bermudan option

Asian option

Periodic exchange of fixed and floating payments up to and including maturity

At maturity by net payment

After maturity by exchange of fixed and floating payments

Two days after maturity by net payment

I buy the base currency at the bid rate.

I buy the base currency at the offer rate.

I buy the counter-currency at the offer rate.

I sell you the base currency at the bid rate,

To anticipate lower volatility in the price of the underlying commodity

To anticipate moderately high volatility in the price of the underlying commodity

To anticipate increasing volatility in the price of the underlying commodity

To anticipate very high volatility in the price of the underlying commodity

Eliminated credit risk

Eliminated market risk

Taken a guarantee from the issuer of the collateral

Taken on market, legal and operational risks

It is good practice to collect and disclose incidents and near-misses for the future benefit of the professional community.

It is good practice to collect and analyze incidents and near-misses so as to set up preventive action plans for the future.

A report describing operational risks should be made at the request of the front office.

A report describing operational risks should be made at least once a year and provided to the front office.

Be over-lent

Have a negative gap

Be exposed to higher interest rates

Be over-borrowed

0.470%

0.196%

0.500%

0.169%

greater, the higher the market swap rate and the shorter the term

lower, the lower the market swap rate and the shorter the term

lower, the lower the market swap rate and the longer the term

greater, the higher the market swap rate and the longer the term

8.30%

8.52%

8.54%

8.69%

Nothing

A margin call is triggered on the seller

A manufactured payment is made to the seller

The equivalent value plus reinvestment income is deducted from the repurchase price

a buyer of Argentine Pesos

expecting a falling USD/ARS rate

hedging against a weakening of the Argentine Peso

speculating on an appreciation of the Argentine Peso

LIBID

LIBOR

EURIBOR

EURO LIBOR

Bought EUR and sold USD spot, and sold EUR and bought USD forward

Bought USD and sold EUR spot, and sold USD and bought EUR forward

Synthetically taken a USD loan in exchange for making a EUR loan with the same counterparty

Sold EUR/USD spot and bought back EUR/USD forward

the credit spread is decreasing

the credit spread is decreasing and recovery rate is increasing

the credit spread is increasing

the recovery rate is increasing

CDS are used to recover funds from defaulted swap counterparties.

CDS provide protection against specified credit events to the party receiving the CDS premium payments.

CDS provide protection against the default of the trade counterparty that buys the CDS.

CDS provide compensation to the protection buyer, should a specified credit event occur to a third party entity.

Management is to proximately inform the local regulator of any suspected drug abuse in either the front office or operations department.

The chief dealer must inform the ACI’s Committee for Professionalism as soon as he suspects any drug or alcohol abuse in his dealing room.

Policies should be developed and clearly announced, including penalties for individuals who are found to be substance abusers.

Management should take all reasonable steps to stop the abuse of drugs, including alcohol and other substances.

Investment funds

Credit institutions and central banks

Corporates

Retail and private customers

credit risk

interest rate risk

liquidity risk

currency risk

The broker must show the borrower’s name to the lender first and disclose the lender’s name only if the borrower is acceptable to the lender.

The broker must show the lender’s name to the borrower first and disclose the borrower’s name only if the lender is acceptable to the borrower.

The broker must show the borrower’s and lender’s names to each other at the same time.

For marketing reasons, the broker can show the lender’s name to the borrower at any time.

an interest rate swap

a forward rate agreement

a short term interest rate future

an interest rate collar

interest rate risk

model risk

currency risk

specific risk

GBP 10,000.00

EUR 10,000.00

GBP 8,990.00

EUR 8,990.00

Treasury bill

CD

Interbank deposit

Classic repo

Exchange-traded

Margined

Standardized

Dealtoverthe counter

Be carried out at least three times a day.

Be agreed between the parties.

Be done at the end of each day.

Be decided by the broker.

USD 4,884,500.00

USD 4,990,375.00

USD 4,990.506.85

USD 4,990,393.49

Management must ensure ongoing lines of communication are in place between the parties.

Management must report to the central bank.

Management allows only experienced dealers to take such orders.

Bank staff must secure the approval of the counterpartqs management to accept such orders.

+USD 373,599.00

÷USD 186,099.00

-USD 1,400.99

Nil

It is not favoured.

It may be permitted when allowed by the local market regulator.

Itis unconditionally accepted bythe Code.

It is allowed only if senior management approval is obtained.

1.6045

1.6047

1.6050

1.6052

An unavailability of credit limit for the counterparty.

The need to reconfirm a transaction.

The unacceptability of the counterparty’s name.

The rate quoted is going to be revised.

Immediately put the price “under reference” and check with the dealer to ascertain his original intention.

Cancel the order.

Continue with the order.

None of the above.

Agree in writing with the fund manager that the allocation will be confirmed as soon as practicable after the transaction is executed.

Insist on the allocation being made and confirmed before the transaction is executed.

Agree in writing with the fund manager that he will guarantee the transaction until the allocation is confirmed.

Any of the above.

Extend the contract to the next business day

Shorten the contract to the previous business day

A new maturity date has to be agreed by the two parties involved

ACI’s Committee for Professionalism decides on a case by case basis

1.6035

1.6027

1.6030

1.6023

An increase in forward USD/CHF

Falling CHF interest rates

A decrease in forward USD/CHF

Rising CHF interest rates

Credit risk

Market risk

Both of the above

None of the above

3,704,500

6,748,549

3,703,000

6,751,283

13.3860-13.4020

13.2435-13.2615

13.2412-13.2638

13.2445-13.2605

Paying a fixed rate of 4.12% per annum on a 30/360 basis over 5 years in euros through an interest rate swap in exchange for receiving a floating rate of 6-month Euribor on an actual/360 basis reset semi-annually and paid in arrears.

Paying a fixed rate of 4.12% per annum on an actual/actual basis over 5 years in euros through an interest rate swap in exchange for receiving a floating rate of 6-month Euribor on an actual/360 basis reset semi-annually and paid in arrears.

Paying a 5-year euro deposit and receiving a rate of interest of 4.12% on an actual/360 basis. Taking a 5-year euro deposit and paying a rate ol interest of 4.12% on an actual/360 basis.

The price of the underlying commodity at the time of the transaction

The price at which the transaction on the underlying commodity will be carried out if and when the option is exercised

The price the buyer of the option pays to the seller when entering into the options contract

The price at which the two counterparties can close-out their position

Will examine the complaint.

May consult with the local ACI.

Will bring the matter to the attention of the local regulator.

None of the above.

Suspicious transactions should be reported by the principals.

Brokers need to make staff aware of the problem and exercise vigilance.

A broker should report any suspicions about a transaction to the other counterparty.

Brokers should advise clients to reject the name.

6-month AUD rates are higher than 6-month NZD rates

6-month AUD rates are lower than 6-month NZD rates

Spot AUD/NZD will be higher by approximately 170 points in 6 months

The AUD yield curve is positive, whilst the NZD curve is negative

Is not considered good practice.

Is accepted in case of direct deal input into the bank’s system.

Is accepted for senior dealers.

Is accepted for hedging transactions.

Between +0.5 and +1

+0.5

Between 0 and +0.5

Zero

SEK interest rates are higher than NOK interest rates

NOK interest rates are higher than SEK interest rates

NOK interest rates are higher than USD interest rates

SEK interest rates and NOK interest rates are converging

They must remain neutral and stay out of disputes between their customers.

They must rely on the execution venue to resolve disputes.

They must delegate the resolution of broken trades downstream to their clients.

They must take responsibility for the swift resolution of any disputes.

1.4523

1.4526

1.4513

1.4516

Delivery repo

HIC repo

To-party repo

“Double dipping” is never a risk in any type of repo

If there is more than one FX trade with a single counterparty to settle in the identical currencies, then both sides should bilaterally agree to settle the trades outside of CLS Bank on a net basis.

If there is only one FX trade with a single counterparty to settle in the identical currencies, then either side can unilaterally decide to settle the trade outside of CLS Bank on a net basis.

If there is more than one FX trade with a single counterparty to settle in the identical currencies, then both sides should bilaterally agree to settle the trade outside CLS Bank on a gross basis.

If there is more than one FX trade with a single counterparty to settle in the identical currencies, then either side can unilaterally instruct the CLS Bank to settle the trades.

A long call option + long put option with the same strike prices

A short call option + short put option with the same strike prices

A long call option + short put option with the same strike prices

A short call option + long put option with the same strike prices

1.4494

1.4499

1.4504

1.4586

the last calendar day of the month

the last bank business day of the month

value last business day of the month against first business day of the next month

value first business day of the month against last business day of the same month

XAU

XAG

XPT

XPD

0.8963

1.1157

1.1159

1.1160

screen services, brokers and other third party providers can all be useful sources of data

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

Inter-dealer brokers or the automated trading system need not be notified when participants attempt to utilize odd settlement dates

It is not recommended that legal opinion should be obtained on the enforceability of the contract

bid side of the near leg swap points minus offered side of the far leg swap points

bid side of the far leg swap points minus offered side of the near leg swap points

offered side of the far leg swap points minus bid side of the near leg swap points

offered side of the near leg swap points minus bid side of the far leg swap points

XAU

XAG

XPT

XPD

solely those of the electronic trading platforms vendors

exclusively ACI’s Model Code Best Practices

ACI’s Model Code Best Practices and ICMA’s Market Practice & Regulatory Policy

the electronic trading platforms vendors’ and the ACIs Model Code Best Practices guidelines

1 minus recovery rate, probability of default and exposure at default

exposure at origination, exposure at default and loss given default

loss given default, 1 minus recovery rate and exposure at default

exposure at origination, recovery rates and probability of default

Sell 3x6

Buy 3x6

Sell 4x7

Buy 4x7

consult the local ACI national association

bring the matter to the appropriate court of justice

examine the complaint

bring the matter to the attention of the appropriate regulatory body

added to spot

subtracted from spot

a negative value

Insufficient information to decide

an exposure in Latvian Lats (LVL)

an exposure in Russian Rouble (RUB)

an exposure in Romanian Leu (RON)

an exposure in Bulgarian Lev (BGN)

buying additional 30-year German Government bonds

selling futures contracts on 30-year German Government bonds

buying futures contracts on 10-year German Government bonds

exercising an early repayment option on a long-term senior borrowing

19/21

2.1/1.9

21/19

0.21/0.19

Effective Expected Potential Exposure

Effective Expected Positive Exposure

Effective Expected Price Earning

Effective Expected Payment Exposure

Semi-annual bond yield of 3.75%

Annual bond yield of 3.75%

Semi-annual money market yield of 3.75%

Annual money market rate of 3.75%

Nothing

A margin call is triggered on the seller

A manufactured payment is made to the seller

Equivalent value plus reinvestment income is deducted from the repurchase price

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

The EUROYEN TIBOR futures contract has a basis point value of JPY 25,000 and a face value of JPY 1,000,000,000

The CME EURODOLLAR futures contract has a minimum price interval of one-quarter basis point value (0.0025) for the nearest contract

The 3-month EURIBOR futures contract has a minimum price interval of half a basis point value (0.0050) for the nearest contract

the average maturity of liabilities on a balance sheet

the difference between the duration of assets and liabilities

the difference between the duration of the longest-held and shortest-held liabilities on the balance sheet

the average maturity of the portfolio on the asset side of a balance sheet

CAD 2,722.19

CAD 460.00

CAD 3,220.00

CAD 2,760.00

0.7961

1.0864

1.7860

1.2561

Hybex should become a payer of a fixed rate on a swap against receipt of LIBOR.

Hybex should become a receiver of a floating rate on a swap against payment of a fixed rate

Hybex should become a receiver of a fixed rate on a swap against payment of LIBOR D.

Hybex should become a receiver of a floating rate on a swap against payment of LIBOR

Proprietary traders

Market-makers

Matched principals

Agents

GBP 7,551.37

GBP 6,544.52

GBP 5,537.67

GBP 1,006.85

0.60%

0.949%

1.074%

0.933%

Market participants should strictly adhere to the rules issued by local regulators, supervisors or central banks in order to maintain efficiency and avoid disputes.

Even if local provisions are in place, market participants should only adhere to the ACI best practices of the Model Code in order to maintain efficiency and avoid disputes.

Participants must at all times adhere to the rules issued by local regulators, supervisors or central banks even if these rules or procedures conflict with any provision of an existing written agreement.

Parties may unilaterally decide whether they wish to adhere to the terms of the agreement or to amend the terms of the transaction to follow the relevant procedure.

Financing long positions

Covering short positions

Interest rate positioning

Dividend tax arbitrage

(i), (ii), (iii), & (iv).

(i), (ii) & (iii).

(i) & (iii).

none of the above.

the practice of a dealer attempting to replace one customer by a new one in a previously dealt transaction

the practice of a broker having to show a new name to the dealer, although he was full on the first name presented to him

the practice of a broker attempting to substitute a third name between the two original counterparties to clear the transaction

the practice of a broker attempting to show a substitution name to get out of a situation in which he was stuffed by a dealer

That the Master FX Give-Up Agreement (FMLG - New York FED FXC) published by the Foreign Exchange Committee can be used for this purpose.

That this agreement need not specify the permitted transaction types, tenors or credit limits.

That this agreement must include instructions that the prime broker must advise the executing dealer promptly of trades for give-up.

That this agreement should not involve any requirement for the executing dealer to inform the prime broker of the material terms of the transaction once a trade has been executed.

Bought EUR and sold USD spot, and sold FUR and bought USD forward

Bought EUR/USD spot and sold EUR/USD forward

Taken a EUR loan in exchange for making a USD loan with the same counterparly

All of the above

A short put option + long call option at the same strike price

A long put option + short call option at the same strike price

A short put option + short call option at the same strike price

A long put option + long call option at the same strike price

123.44

123.65

123.86

123.90

Currency risk

Interest rate risk

Operational risk

Credit risk

enable the parties to comply with any capital adequacy requirements

provide for the absolute transfer of title to securities

provide for the calculation of initial consideration of the repo transaction

detail the course of action in the case of defaults, for example the rights and obligations of the counterparties and the full set-off of claims between the parties

USTreasury bill

CD

Interbank deposit

ECP

GBP 10,000

EUR 10,000

GBP 6,990

EUR 6,990

the tenth of the following months: March, June, September and December

the third Wednesday of January, April, July and October

the Monday before the third Wednesday of March, June, September and December

the third Wednesday of March, June, September and December

Gambling and betting between market participants should be strongly discouraged.

Gambling and betting between market participants can be allowed if it is monitored by management.

Gambling and betting between market participants should be forbidden.

All of the above.

both parties to the dispute are members of the ACI and agree to submit the dispute to the ACI

one of the counterparties requests the assistance of ACI’s Committee for Professionalism

the two counterparties are located in different financial centers

the amount in dispute is more than USD 100,000.00 or equivalent

A nostro account is an account held by a bank in a foreign country in the banks domestic currency.

A nostro account is an account held by a bank in a foreign country for cash collateralising OTC derivative positions with banks in that country.

A nostro account is an account held by a bank in a foreign country in the currency of that country.

A nostro account is an account held by a bank in its home country in a foreign currency.

An exchange ot two streams of interest payments in different currencies and an exchange of the principal amounts of those currencies at maturity

A spot sale (purchase) and a forward purchase (sale) of two currencies agreed simultaneously between two parties

An exchange of currencies on a date beyond spot and at a price fixed today

None of the above

Bid/offer spread

Flow information

Relationships

All of the above

Sending settlement instructions

Investigating settlement discrepancies

Keeping a contact list of all back office staff of the bank’s counterparties

Exchanging standard settlement instructions (SSIs)

Higher interest rates

Lower interest rates

Steepening yield curve

Parallel shift downwards in the yield curve

Sell a 1x3 FRA at 1.95%

Buy a 1x3 FRA at 1.98%

Buy a 1x4 FRA at 2.10%

Sell a 1x4 FRA at 2.10%

GBP 47,875,000.00

GBP 49,462,847.22

GBP 49,470,205.48

GBP 49,475,760.27

Survive a liquidity crisis

Absorb credit losses

Absorb any type of unexpected loss

Absorb any type of expected loss

You receive USD 12,330.46

You pay USD 12,330.46

You pay USD 12,163.81

You receive USD 12,163.81

USD 124,641,442.43

USD 124,636,476.94

USD 124,635,416.67

USD 123,915,737.30

a swap

a cap

a swaption

a collar

Banks should not ask brokers to disclose details of third party transactions unless they are between overseas principals.

Banks should not ask brokers to disclose details of third party transactions unless these transactions are already settled.

Banks should not ask brokers to disclose transactions between third parties in any circumstances.

Banks should not ask brokers for details of third party transactions unless senior management has approved.

Any dealer as long as he/she is not a party to the trade.

Staff in the back-office.

Staff in the dealing room who are not dealing.

Any staff outside the dealing room.

This is a normal volume discount.

The offer requires approval in writing by both senior managements.

The offer requires agreement in writing between the broker and the dealer.

This is illegal.

the monetary authority in the country where the broker is located

the banking association in the country where the bank is located

the Committee for Professionalism of the ACI

the local foreign exchange market committee

As quickly as possible.

Within 24 hours of the transaction.

Setore 10:00 am on the value date.

Betore close of business on the transaction date.

1.038579

1.038582

1.038418

1.038421

8% of RWA plus conservation buffer

10.5% of RWA plus conservation buffer

8% of RWA plus countercyclical buffer

10.5% of RWA plus countercyclical buffer

The market value of bond collateral at the end of the repo at the clean price of the bond

The market value of bond collateral at the end of the repo at the dirty price of the bond

The amount of cash actually paid for collateral at the start of the repo

The amount of cash actually paid for collateral at the start of the repo plus repo interest

GBP 2,507,161.46

GBP 2,507,063.36

GBP 2,507,006.85

GBP 2,507,106.16

Credit Value Adaption

Call Value Adaption

Credit Value Adjustment

Counterpart Value Adjustment

No, it doesn’t, since the slope of the yield cure is unrelated to the spread between short-term and long-term interest rates.

No, it doesn’t. There isn’t any link at all between the slope of the interest yield curve and a bank’s net interest margin.

Yes it does. In banking, long-term rates usually apply to bank deposits and money market borrowings whereas short-term interest rates are attached to loans and securities.

Yes it does. Long-term rates usually apply to a bank’s assets (loans, securities, etc.) and the short term interest rates are generally attached to liabilities (deposits, money market borrowings, etc.).

Mark-to-model valuation is used for exchange-traded positions to ensure correct pricing.

Asset managers are not allowed to use mark-to-model valuation.

Mark-to-model valuation is used for complex financial instruments; it is always accurate and in line with potential tradable prices.

Mark-to-model valuation refers to prices determined by financial models, rather than actual market prices.

They must be posted with a clear intent to be tradable.

They must be identified as indicative rates only.

They must be posted subject to later credit line approval.

They need not be posted in an appropriate trading style.

EUR

JPY

HKD

AUD

if you do so when you make the price

provided the amounts are marketable

once you have discovered the name of the counterparty for credit reasons

at anytime

JPY 152,090

JPY 152,139

JPY 152,169

JPY 152,217

Long a straight bond + pay fixed on a swap = long a synthetic Floating Rate Note

Long a straight bond + pay floating on a swap = long a synthetic Floating Rate Note

Short a straight bond + receive fixed on a swap = long a synthetic Floating Rate Note

Short a straight bond + pay fixed on a swap = long a synthetic Floating Rate Note

a 1x2 FRA short position

a 1- against 2-month buy and sell forward/forward FX swap

a 1- against 2-month sell and buy forward/forward FX swap

a 1- against 2-month forward/forward long position

e-mail

fax or letter

MTn99 SWIFT message

MT670/671 SWIFT message

currency risk

operational risk

liquidity risk

settlement risk

adding up expected vault cash outflows, ATMs and other cash points operated by the institution across all branches

establishing a forward cash flow plan that takes account of all contractual and behavioral cash flows related to assets and liabilities

the net cash flow from investment activities in the IFRS consolidated Statement of Cash Flows for prior periods

subtracting short-term liabilities from short-term assets

to keep enough highly liquid assets to cover its net liabilities for the next 10 days to guard against severe liquidity stress

to keep enough highly liquid assets to cover its net liabilities for the next 30 days to guard against severe liquidity stress

to keep enough highly liquid assets to cover its net liabilities for the next 60 days to guard against severe liquidity stress

to retain enough liquidity to cover its assets against severe default risk

Go short of the underlying commodity equal to 50% of the size of the option contract

Go long of the underlying commodity equal to 50% of the size of the option contract

Go long of the underlying commodity equal to more than 50% of the full size of the option contract

Go short of the underlying commodity equal to more than 5O% of the full size of the option contract

the Canadian “Maple Leaf”

the South African “Krugerand”

the American “Gold Eagle”

the United Kingdom “Sovereign”

Legal documentation must be put in place as soon as possible after transaction.

All market participants should use the Modified Previous Business Day Convention.

The exact maturity (end) dates for transactions must be agreed as soon as possible after a transaction.

All market participants should use the Modified Following Business Day Convention.

deduct points from the broker or adjust the brokerage bill accordingly

in some centres, ask either the central bank or some other neutral body to investigate and confidentially verify that there was support for the original price or rate

in some centres, ask the local ACI to investigate and confidentially verify that there was support for the original price or rate

insist that the broker discloses the name of the other counterparty

1.4242

1.4232

1.4246

1.4237

the swap curve is shifting downwards

the swap curve is shifting upwards

swaption volatilities are decreasing

time to expiry is becoming shorter

the trade is within the specified tenor limits

the trade is within the tenor limits and is of an applicable trade type

the trade is within the tenor limits and credit limits

the trade is within the tenor limits, credit limits and is of an applicable trade type

It is a measure of the average price of a financial instrument.

It doesn’t take into account the timing and market value of cash flows.

It increases if the average coupon increases.

It decreases as maturity decreases

The offer side of the quotes it is making to other banks

The offer side of the quotes which it is receiving from other banks

The offer side of the interbank quotes it observes being made by prime banks

The offer side of the quotes it has actually borrowed at