Click on the Detail Button to view the Formula Sheet. A disgruntled customer claims that he should not have to settle an FRA with you because it is really just a wager. What type of risk are you exposed to?
A. Credit risk
B. Legal risk
C. Settlement risk
D. Basis risk
Click on the Detail Button to view the Formula Sheet. A customer based in the UK exports automotive parts to the US. His main competitor is in France? What type of exposure to currency risk is posed by movements in EUR/USD?
A. Transaction exposure
B. Translation exposure
C. Economic exposure
D. None
Click on the Detail Button to view the Formula Sheet. Which of the following is not true?
A. The Model Code is published by ACI's Committee for Professionalism.
B. The Model Code sets out the practicalities of dealing in those financial instruments listed in the Model Code.
C. The Model Code is an attempt to deal with the legal issues relating to every conceivable financial instrument.
D. The Model Code sets out the manner and spirit in which foreign exchange and money market business should be conducted in order that participants maintain high standards of professionalism, integrity and ethical conduct.
Click on the Detail Button to view the Formula Sheet. You bought USD 5,000,000 against EUR at 1.1037 and 3,000,000 at 1.1052. If the EUR/USD rate is now quoted 1.1015/17, and if you deal at that rate, what profit would you make?
A. Nil
B. A profit of EUR 16,847.58
C. A loss
D. A profit of EUR 18,166.05
Click on the Detail Button to view the Formula Sheet. What type of risk would describe the failure of a back office to make adequate margin calls on repo positions?
A. Credit risk
B. Market risk
C. Operational risk
D. Settlement risk
Click on the Detail Button to view the Formula Sheet. An option contract that gives the buyer the right to exercise the option at the average of the prices of the underlying during its life is called:
A. European-style option
B. American-style option
C. Bermudan option
D. Asian option
Click on the Detail Button to view the Formula Sheet. The delta of an at-the-money long call option is:
A. Between +0.5 and +1
B. +0.5
C. Between 0 and +0.5
D. Zero
Click on the Detail Button to view the Formula Sheet. How can options be used to synthesise a short position in the underlying commodity?
A. A short put option + long call option at the same strike price
B. A long put option + short call option at the same strike price
C. A short put option + short call option at the same strike price
D. A long put option + long call option at the same strike price
Click on the Detail Button to view the Formula Sheet. An option is:
A. The right to buy or sell a commodity at a fixed price
B. The right to buy a commodity at a fixed price
C. The right but not the obligation to buy or sell a commodity at a fixed price
D. The right but not the obligation to buy commodity at a fixed price
Click on the Detail Button to view the Formula Sheet. The premium on an option contract is:
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
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