What are the components of a FX swap?
A. two opposing spot trades
B. a spot trade and a forward trade
C. a cash trade with same-day settlement and a forward trade
D. an outright and a barrier option
What do FX swap rates represent?
A. an interest rate differential between two currencies
B. the price of an option
C. the expectation of an appreciation of a currency
D. the volatility of a currency
When is your delivery risk greatest on an FX deal executed today for value spot?
A. today
B. tomorrow
C. after you have made irrevocable payment
D. on settlement day
The discount or premium on forward foreign exchange points is calculated based on:
A. the level of interest rates in the base currency
B. the level of interest rates in the counter currency
C. the differential between the interest rates in the two currencies
D. the current volatility in the FX markets
FX Swaps can be used to:
A. swap a fixed leg into a variable leg
B. buy or sell the currency of your choice
C. arbitrage between foreign exchange and interest rates
D. arbitrage between deposits and forward points
Forward points represent:
A. the value of a currency against its base
B. largely the interest rate differential between two currencies
C. the time/value ratio of one currency versus another
D. the future value of a currency
If a money market dealer considers placing a given amount at another bank, he must first of all check:
A. the level of the prevailing market rates
B. if the funds are available on the nostro account of the bank
C. if they will be able to generate the outgoing payment
D. the availability on the country limit and the credit line of his counterparty
Illiquid describes an instrument which:
A. does not trade in an active market
B. does not trade on any exchange
C. cannot be easily hedged
D. is an over-the-counter (OTC) product
To ensure effective risk management within a large financial institution, the head of risk management should report to:
A. the head of trading
B. the head of IT
C. the board of directors (top management)
D. one cannot say, it depends on the financial institution
Some large losses occurred in the past from derivatives trading because:
A. Derivatives brokers significantly over-charged their clients
B. Institutions did not understand the leverage of their transactions
C. Money managers engaged in intra-day trading
D. Money managers embezzled money using derivatives
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