What is the advantage of instantaneous matching?
A. it gives the counterparty more time to cancel a deal
B. it reduces errors and costs
C. it gives front-office staff more time to process the payment orders
D. it increases transaction costs
How are accounting entries USUALLY generated?
A. They are generated based on a code profile held for each product type on a time event basis.
B. They are generated based on a code profile held for each front office staff member.
C. They are generated based on the nature of instruments (debits = first priority / credits = second priority).
D. They are generated in the morning at start of business when there is no direct link to other systems.
Why should the maturity profile of unreconciled items be frequently reviewed?
A. It allows the compliance officer to see how often the reconciliation staff has claimed for an outstanding item
B. It allows management to see what items are pending by value and counterparty, but also how long items have been outstanding and whether there is an improvement in the pace of reconciliations.
C. It allows reconciliation staff to check the bilateral limits with counterparties and to adjust these limits as necessary
D. because the most recent figures have to be published in the balance report
Settlement risk is:
A. the risk that a bank makes its payment but does not receive a return payment in the exchanged currency
B. the risk that exchange rates move against a banks position
C. the risk a counterparty defaults on a contract and a bank has to replace that contract at adverse rates
D. the risk of a disaster that disables a bank's trading floor
Which settlement system offers the lowest risks?
A. EBA
B. CLS
C. TARGET
D. EAF
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
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
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
Your bank purchases a FRA at 5.75% in USD. Under what conditions will you pay a cash settlement?
A. if EURIBOR is higher than 5.75%
B. if EURIBOR is lower than 5.75%
C. if LIBOR is lower than 5.75%
D. if LIBOR is higher than 5.75%
When is the settlement amount of a FRA normally payable?
A. at the beginning of the forward period
B. on the trade date
C. on the maturity (final) date
D. at any time before the contract's maturity date
