Click on the Detail Button to view the Formula Sheet. What is the effect of netting?
A. To reduce the number and size of payments and transfers
B. To reduce exposure to credit risk
C. To reduce the size of the balance sheet
D. All of the above
Click on the Detail Button to view the Formula Sheet. What is settlement risk in FX?
A. The risk of failure of a payments or settlement system
B. The risk that only one side of an exchange of currencies will be made
C. The risk of payments gridlock in a real-time gross settlement system
D. The risk that default by a counterparty before the value date means you have to replace the defaulted deal at a worse rate
Click on the Detail Button to view the Formula Sheet. What is a Vostro account?
A. Your account at another bank
B. A foreign bank's account in your bank in your domestic currency
C. An account in your bank used for internal transactions
D. A customer's account at your bank
Click on the Detail Button to view the Formula Sheet. For which of the following reasons is the extension of
forward contracts at non-current rates is discouraged:
These could be used to conceal profit or losses.
ii.These could be used to perpetrate fraud.
iii.These could result in an unauthorised extension of credit.
iv.These could result in confusing settlement instructions.
A. (i), (ii), (iii), and (iv).
B. (i), (ii) and (iii).
C. (i) and (iii).
D. none of the above.
Click on the Detail Button to view the Formula Sheet. A dealer does the following deals in EUR/USD: buys EUR 1 m at 1.1020 sells EUR 3 m at 1.1022 buys EUR 2 m at 1.1002 buys EUR 1.5 m at 1.1012 What position does the dealer now have?
A. Long EUR 1.5 m at 1.0984
B. Short EUR 1.5 m at 1.1036
C. Long EUR 1.5 m at 1.1012
D. Short EUR 3.0 m at 1.1025
Click on the Detail Button to view the Formula Sheet. The theta of an option is:
A. The sensitivity of the option value to changes in interest rates
B. The sensitivity of the option value to changes in 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
Click on the Detail Button to view the Formula Sheet. What is the probability of an at-the-money option being exercised?
A. Less than 50% probability
B. 50% probability
C. More than 50% probability
D. Zero probability
Click on the Detail Button to view the Formula Sheet. The intrinsic value of a long call option:
A. Falls and rises with the price of the underlying commodity, but is always positive
B. Rises if the price of the underlying commodity falls and vice versa
C. Depends solely on the volatility of the price of the underlying commodity
D. Becomes negative if the market price of the underlying commodity falls below the strike price of the option
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. An option contract that gives the buyer the right to exercise the option at several distinct points during its life is called:
A. European-style option
B. American-style option
C. Bermudan option
D. Asian option
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