ACI-Dealing Certificate (2) Set 2

1.

The major risk to the effectiveness of netting is:

Credit risk Settlement risk Liquidity risk Legal risk

2.

Which of the following methods is a means of credit risk mitigation?

entering into a plain vanilla IRS entering into collateral agreements hedging a portfolio's USD exposure investing only in sizeable and liquid markets

3.

Which of the following scenarios offer an example of wrong way risk?

A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels A bank enters into a receiver's swap while interest rates are increasing

4.

Which of the following is typical of liquid assets held by banks under prudential requirements?

prices increase during a systemic crisis return on investment is relatively high absence of active market makers wide bid/offer spreads

5.

What is the correct interpretation of a EUR 2,000,000.00 overnight VaR figure with a 97% confidence level?

A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days. A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days. A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days. A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

6.

Hybex Electrics is a highly rated company with a considerable amount of fixed rate liabilities and would like to increase the percentage of floating rate debt. Which of the following is the best course of action?

Hybex should become a payer of a fixed rate on a swap against receipt of LIBOR. Hybex should become a receiver of a floating rate on a swap against payment of a fixed rate Hybex should become a receiver of a fixed rate on a swap against payment of LIBOR D. Hybex should become a receiver of a floating rate on a swap against payment of LIBOR

7.

Which one of the following statements correctly describes the increased capital ratios that will come into effect under Basel III?

minimum tier 1 capital of 4.5% and minimum total capital plus a conservation buffer of 10.5% minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 8% minimum tier 1 capital of 4% and minimum total capital including conservation buffer of 10.5% minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 10.5%

8.

Responsibility for the activities of all personnel engaged in dealing (both dealers and support staff) for both principals and brokers lies with:

the market supervisor the national ACI association the management of such organizations the central bank

9.

Which Greek letter is used to describe the ratio of change in the option price compared with change in the price of the underlying instrument, when all other conditions are fixed?

beta gamma delta theta

10.

When banks transact FX swaps, the spot price should be determined:

anytime after the swap is transacted before the swap is transacted immediately after the swap is transacted no less than 24 hours after the completion of the swap

ACI-Dealing Certificate (2) Set 2

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ACI-Dealing Certificate (2) Set 2

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Congratulations

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