Question 1

Which one of the following best describes expected shortfall/conditional value-at-risk at the 95% level?

Accepted Answer

A)  the expected loss on the portfolio in the worst 95% of cases 
B)  the expected loss in those cases where the loss exceeds the VaR at the 95% level 
C)  the maximum loss in those cases where the loss exceeds the VaR at the 95% level 
D)  the expected loss in those cases where the loss exceeds the VaR at the 5% level 
A)  the expected loss on the portfolio in the worst 95% of cases 
B)  the expected loss in those cases where the loss exceeds the VaR at the 95% level 
C)  the maximum loss in those cases where the loss exceeds the VaR at the 95% level 
D)  the expected loss in those cases where the loss exceeds the VaR at the 5% level

Question 2

The buyer of a cap:

Accepted Answer

A)  Receives compensation if a reference interest rate falls below an agreed level 
B)  Pays compensation if a reference interest rate falls below an agreed level 
C)  Receives compensation if a reference interest rate rises above an agreed level 
D)  Pays compensation if a reference interest rate rises above an agreed level 
A)  Receives compensation if a reference interest rate falls below an agreed level 
B)  Pays compensation if a reference interest rate falls below an agreed level 
C)  Receives compensation if a reference interest rate rises above an agreed level 
D)  Pays compensation if a reference interest rate rises above an agreed level

Question 3

If you take an 18-month USD deposit, when is interest payable?

Accepted Answer

A)  Quarterly 
B)  At maturity 
C)  Semi-annually 
D)  After one year and at maturity 
A)  Quarterly 
B)  At maturity 
C)  Semi-annually 
D)  After one year and at maturity

Question 4

If spot USD/HKD is 7.7600 and USD/SGD is 1.2350, what is SGD/HKD?

Accepted Answer

A)  9.5836 
B)  6.2834 
C)  0.1591 
D)  0.1043 
A)  9.5836 
B)  6.2834 
C)  0.1591 
D)  0.1043

Question 5

The Model Code recommends that, in the case or complaints about transactions, management should:

Accepted Answer

A)  Ensure complaints are investigated by the senior management or a firm not involved in the disputed transaction. 
B)  Ensure complaints are rairly and independently investigated, in the first instance, by the ACIs Committee for Professionalism. 
C)  Ensure complaints are investigated by representatives of a broking firm not directly involved in the disputed transaction and selected by both parties to the dispute. 
D)  Ensure complaints are fairly and independently investigated, whenever practicable, by staff not directly involved in the disputed transaction. 
A)  Ensure complaints are investigated by the senior management or a firm not involved in the disputed transaction. 
B)  Ensure complaints are rairly and independently investigated, in the first instance, by the ACIs Committee for Professionalism. 
C)  Ensure complaints are investigated by representatives of a broking firm not directly involved in the disputed transaction and selected by both parties to the dispute. 
D)  Ensure complaints are fairly and independently investigated, whenever practicable, by staff not directly involved in the disputed transaction.

Question 6

Which of the following statements best describes the conditions under which a prime broker may accept a trade given up?

Accepted Answer

A)  the trade is within the specified tenor limits 
B)  the trade is within the tenor limits and is of an applicable trade type 
C)  the trade is within the tenor limits and credit limits 
D)  the trade is within the tenor limits, credit limits and is of an applicable trade type 
A)  the trade is within the specified tenor limits 
B)  the trade is within the tenor limits and is of an applicable trade type 
C)  the trade is within the tenor limits and credit limits 
D)  the trade is within the tenor limits, credit limits and is of an applicable trade type

Question 7

What is settlement risk in FX?

Accepted Answer

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 
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

Question 8

Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on currency transactions by:

Accepted Answer

A)  Establishing realistic daylight limits for counterparties. 
B)  Monitoring all payments to counterparties who are known to be experiencing difficulties. 
C)  Establishing legally binding bilateral netting agreements with counterparties or participating in a multilateral netting system. 
D)  Seeking pre-payment. 
A)  Establishing realistic daylight limits for counterparties. 
B)  Monitoring all payments to counterparties who are known to be experiencing difficulties. 
C)  Establishing legally binding bilateral netting agreements with counterparties or participating in a multilateral netting system. 
D)  Seeking pre-payment.

Question 9

Which of the following statements about leverage ratios under Basel III is correct?

Accepted Answer

A)  The leverage ratio is the ratio of the bank's Tier 1 Capital to total assets of the bank, excluding its off- balance sheet exposures and derivatives. 
B)  The purpose of introducing a leverage ratio is to avoid the build-up of excess leverage that could potentially lead to a "credit crunch" in stressed conditions. 
C)  The leverage ratio under Basel III must be higher than 4%. 
D)  The leverage ratio is the ratio of the bank's Tier 1 and Tier 2 Capital to total assets of the bank, including its off-balance sheet exposures and derivatives. 
A)  The leverage ratio is the ratio of the bank's Tier 1 Capital to total assets of the bank, excluding its off- balance sheet exposures and derivatives. 
B)  The purpose of introducing a leverage ratio is to avoid the build-up of excess leverage that could potentially lead to a "credit crunch" in stressed conditions. 
C)  The leverage ratio under Basel III must be higher than 4%. 
D)  The leverage ratio is the ratio of the bank's Tier 1 and Tier 2 Capital to total assets of the bank, including its off-balance sheet exposures and derivatives.

Question 10

Dealers are authorized to deal:

Accepted Answer

A)  anywhere, even away from their own dealing premises 
B)  after-hours, but only if listed as such by management 
C)  after-hours, but only from their private residence 
D)  away from their broker's dealing premises 
A)  anywhere, even away from their own dealing premises 
B)  after-hours, but only if listed as such by management 
C)  after-hours, but only from their private residence 
D)  away from their broker's dealing premises

Question 11

What does the Model Code say about the responsibility of a broker in handling suspicious transactions?

Accepted Answer

A)  Suspicious transactions should be reported by the principals. 
B)  Brokers need to make staff aware of the problem and exercise vigilance. 
C)  A broker should report any suspicions about a transaction to the other counterparty. 
D)  Brokers should advise clients to reject the name. 
A)  Suspicious transactions should be reported by the principals. 
B)  Brokers need to make staff aware of the problem and exercise vigilance. 
C)  A broker should report any suspicions about a transaction to the other counterparty. 
D)  Brokers should advise clients to reject the name.

Question 12

What happens when a coupon is paid on bond collateral during the term of a classic repo?

Accepted Answer

A)  Nothing 
B)  A margin call is triggered on the seller 
C)  A manufactured payment is made to the seller 
D)  Equivalent value plus reinvestment income is deducted from the repurchase price 
A)  Nothing 
B)  A margin call is triggered on the seller 
C)  A manufactured payment is made to the seller 
D)  Equivalent value plus reinvestment income is deducted from the repurchase price

Question 13

The Market Segmentation hypothesis suggests that the yield curve bends at some point along its length because:

Accepted Answer

A)  Investors have less appetite for longer-term investments 
B)  Borrowers prefer to borrow long-term but lenders prefer to lend short-term 
C)  Different types of institution tend to specialize in different maturity ranges 
D)  The risk premium becomes significant only at longer maturities 
A)  Investors have less appetite for longer-term investments 
B)  Borrowers prefer to borrow long-term but lenders prefer to lend short-term 
C)  Different types of institution tend to specialize in different maturity ranges 
D)  The risk premium becomes significant only at longer maturities

Question 14

Under the Model Code, it a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

Accepted Answer

A)  No deal is done. 
B)  The deal is done. 
C)  It should be resolved in consultation with senior management. 
D)  The central bank should be consulted. 
A)  No deal is done. 
B)  The deal is done. 
C)  It should be resolved in consultation with senior management. 
D)  The central bank should be consulted.

Question 15

The Model Code strongly recommends that intra-day oral deal checks should:

Accepted Answer

A)  Be conducted out at the end of the morning and afternoon trading sessions. 
B)  Be only be conducted after the close of business. 
C)  Be mutually agreed between the bank and the broker or counterparty. 
D)  Be the responsibility of the broker. 
A)  Be conducted out at the end of the morning and afternoon trading sessions. 
B)  Be only be conducted after the close of business. 
C)  Be mutually agreed between the bank and the broker or counterparty. 
D)  Be the responsibility of the broker.

Question 16

Which of the following statements about Credit Default Swaps (CDS) is correct?

Accepted Answer

A)  CDS are used to recover funds from defaulted swap counterparties. 
B)  CDS provide protection against specified credit events to the party receiving the CDS premium payments. 
C)  CDS provide protection against the default of the trade counterparty that buys the CDS. 
D)  CDS provide compensation to the protection buyer, should a specified credit event occur to a third party entity. 
A)  CDS are used to recover funds from defaulted swap counterparties. 
B)  CDS provide protection against specified credit events to the party receiving the CDS premium payments. 
C)  CDS provide protection against the default of the trade counterparty that buys the CDS. 
D)  CDS provide compensation to the protection buyer, should a specified credit event occur to a third party entity.

Question 17

A Eurozone-based bank that is liability-sensitive to market interest rate changes might reduce interest rate risk by:

Accepted Answer

A)  entering into a pay fixed I receive variable standard interest rate swap 
B)  entering into a receive fixed I pay variable amortizing interest rate swap 
C)  entering into a EUR/USD FX swap 
D)  entering into a receive fixed I pay variable standard interest rate swap 
A)  entering into a pay fixed I receive variable standard interest rate swap 
B)  entering into a receive fixed I pay variable amortizing interest rate swap 
C)  entering into a EUR/USD FX swap 
D)  entering into a receive fixed I pay variable standard interest rate swap

Question 18

Which of the following is true?

Accepted Answer

A)  The 3-month EURODOLLAR futures contract has a basis point value of USD 50.00 and a face value of USD 1,000,000.00 
B)  The 3-month EURIBOR futures contract has a a basis point value of EUR 12.50 and a face value of EUR 500,000.00 
C)  The 3-month Sterling (SHORT STERLING) futures contract has a a basis point value of GBP 12.50 and a face value of GBP 500,000.00 
D)  The 3-month Euro Swiss Franc (EUROSWISS) futures contract has a a basis point value of CHF 50.00 and a face value of CHF 2,000,000.00 
A)  The 3-month EURODOLLAR futures contract has a basis point value of USD 50.00 and a face value of USD 1,000,000.00 
B)  The 3-month EURIBOR futures contract has a a basis point value of EUR 12.50 and a face value of EUR 500,000.00 
C)  The 3-month Sterling (SHORT STERLING) futures contract has a a basis point value of GBP 12.50 and a face value of GBP 500,000.00 
D)  The 3-month Euro Swiss Franc (EUROSWISS) futures contract has a a basis point value of CHF 50.00 and a face value of CHF 2,000,000.00

Question 19

When quoting the exchange rate between the EUR and AUDI which is conventionally the base currency?

Accepted Answer

A)  EUR 
B)  AUD 
C)  Depends on whether the price is being quoted in Europe or Australia 
D)  Depends on whether the price is being quoted interbank or to a customer 
A)  EUR 
B)  AUD 
C)  Depends on whether the price is being quoted in Europe or Australia 
D)  Depends on whether the price is being quoted interbank or to a customer

Question 20

After having quoted a rate of 1.5005-10, the quoting bank says, "Your risk". This means:

Accepted Answer

A)  The quoted rate is subject to change at the risk of the price-taker 
B)  The quoting bank is reminding you of the market risk of your potential trade 
C)  This is a requirement of any market maker 
D)  The market maker needs to check your credit limit 
A)  The quoted rate is subject to change at the risk of the price-taker 
B)  The quoting bank is reminding you of the market risk of your potential trade 
C)  This is a requirement of any market maker 
D)  The market maker needs to check your credit limit

Which one of the following best describes expected shortfall/conditional value-at-risk at the 95% level?

The buyer of a cap:

If you take an 18-month USD deposit, when is interest payable?

If spot USD/HKD is 7.7600 and USD/SGD is 1.2350, what is SGD/HKD?

The Model Code recommends that, in the case or complaints about transactions, management should:

Which of the following statements best describes the conditions under which a prime broker may accept a trade given up?

What is settlement risk in FX?

Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on currency transactions by:

Which of the following statements about leverage ratios under Basel III is correct?

Dealers are authorized to deal:

What does the Model Code say about the responsibility of a broker in handling suspicious transactions?

What happens when a coupon is paid on bond collateral during the term of a classic repo?

The Market Segmentation hypothesis suggests that the yield curve bends at some point along its length because:

Under the Model Code, it a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

The Model Code strongly recommends that intra-day oral deal checks should:

Which of the following statements about Credit Default Swaps (CDS) is correct?

A Eurozone-based bank that is liability-sensitive to market interest rate changes might reduce interest rate risk by:

Which of the following is true?

When quoting the exchange rate between the EUR and AUDI which is conventionally the base currency?

After having quoted a rate of 1.5005-10, the quoting bank says, "Your risk". This means:

ACI Dealing Certificate-Part A

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Exam 2: ACI Dealing Certificate-Part B

Which one of the following best describes expected shortfall/conditional value-at-risk at the 95% level?

The buyer of a cap:

If you take an 18-month USD deposit, when is interest payable?

If spot USD/HKD is 7.7600 and USD/SGD is 1.2350, what is SGD/HKD?

The Model Code recommends that, in the case or complaints about transactions, management should:

Which of the following statements best describes the conditions under which a prime broker may accept a trade given up?

What is settlement risk in FX?

Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on currency transactions by:

Which of the following statements about leverage ratios under Basel III is correct?

Dealers are authorized to deal:

What does the Model Code say about the responsibility of a broker in handling suspicious transactions?

What happens when a coupon is paid on bond collateral during the term of a classic repo?

The Market Segmentation hypothesis suggests that the yield curve bends at some point along its length because:

Under the Model Code, it a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

The Model Code strongly recommends that intra-day oral deal checks should:

Which of the following statements about Credit Default Swaps (CDS) is correct?

A Eurozone-based bank that is liability-sensitive to market interest rate changes might reduce interest rate risk by:

Which of the following is true?

When quoting the exchange rate between the EUR and AUDI which is conventionally the base currency?

After having quoted a rate of 1.5005-10, the quoting bank says, "Your risk". This means:

ACI Dealing Certificate-Part A

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