You are in the pub with a friend who works for another financial institution. The friend asks you for information about a mutual customer's forward foreign exchange dealing volumes. What should you do?
A. tell him all you know
B. tell him nothing
C. give him some of the information because the deal involves a mutual customer
D. tell him you will investigate and get back to him with the information
A large corporate client sends you a case of expensive wine as a reward for settling a compensation case in their favor. What should you do?
A. You should decline the gift.
B. You should share the gift amongst your back office colleagues.
C. You should report the gift to management and leave it to the management's discretion as to whether you are allowed to keep the gift.
D. You should accept the gift without question as it was personally addressed to you.
What is the replacement risk of an OTC derivative trade?
A. the risk that there is no liquid market at the exchange to close a trade
B. the risk that the present value of a trade will be negative one day prior to value date
C. the risk that an OTC-derivative product cannot be closed before maturity
D. the loss incurred if the counterparty defaults
Bank A has a large number of forward OTC trades with Bank B. What risks will be reduced by concluding a netting agreement?
A. market-price-risk and replacement risk
B. market-price-risk and delivery risk
C. replacement risk and delivery risk
D. replacement risk and basis risk
As far as interest rate swaps are concerned, which risk is reduced or eliminated when a close-out netting agreement is in place?
A. replacement risk
B. volatility risk
C. commercial risk
D. market risk is reduced to a predefined amount
What are the consequences for credit risk when a collateral agreement is added to a netting agreement?
A. A collateral agreement eliminates the future replacement risk
B. A collateral agreement can reduce market risk
C. A collateral agreement can reduce operational risk
D. A collateral agreement can reduce the replacement risk
Your forward CHF dealer asks you, the junior settlements clerk, to amend revaluation rates for the forward CHF book before they are submitted to the risk management department for input. What should you do?
A. amend the rates as requested
B. refuse to amend the rates, but say nothing
C. refuse and report the incident to your superior
D. refuse and report the incident to your colleague
Which of the following trades involves replacement risk?
A. the purchase of shares through Deutsche-Brse-Clearing (payment against delivery)
B. the purchase of an OTC call option
C. the taking of call money
D. a long position in Bund futures
Which risk factors fall under counterparty risk?
A. currency risk, interest rate risk and swap risk
B. settlement risk, delivery risk and replacement cost
C. operational risk
D. settlement risk and swap risk
Which of the following is an example of market risk?
A. counterparty risk
B. country risk
C. settlement risk
D. stock price risk
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