ACI-Dealing Certificate (2) Set 3

1.

Today, you sold 10 December EURODOLLAR futures contracts at 99.50. The closing price is fixed by the exchange at 99.375. What variation margin will be due?

You will have to pay USD 312.50 You will receive USD 312.50 You will have to pay USD 3,125.00 You will receive USD 3,125.00

2.

What is a short straddle option strategy?

A long call option + long put option with the same strike prices A short call option + short put option with the same strike prices A long call option + short put option with the same strike prices A short call option + long put option with the same strike prices

3.

What is the probability of an 'at-the-money' option being exercised?

Less than 50% probability 50% probability More than 50% probability Zero probability

4.

What is a short strangle option strategy?

A short call option + long put option with a higher strike price than the call option A long call option + long put option with a lower strike price than the call option A short call option + short put option with a lower strike price than the call option A long call option + long put option with higher strike price than the call option

5.

A euro zone-based bank that is asset-sensitive to market interest rate changes might reduce interest rate risk by:

entering into a pay fixed I receive variable standard interest rate swap entering into a receive fixed I pay variable standard interest rate swap entering into a pay fixed / receive variable amortizing interest rate swap entering into a GBP/USD FX swap

6.

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

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. 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. The leverage ratio under Basel III must be higher than 4%. 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.

7.

Complete the following sentence. If a bank has an asset repricing in 6 months funded by a liability repriced in 3 months:

the bank would benefit from higher interest rates the bank could hedge this interest rate risk with a 3x6 derivative the bank will make mark-to-market losses if rates decrease the bank could hedge this interest rate risk by selling a 6x9 derivative

8.

The Liquidity Coverage Ratio (LCR) in Basel III:

is a new rule that compares liquid asset levels in banks to their available equity capital spells out a modernized system for calculating the required minimum reserve that banks must hold at the central bank compares liquid and reliably liquidating assets to expected cash outflows from specified run-off rates for various liability classes under a short-term stressscenario tied directly into the internal ratings-based approach for determining the liquidity of credit-counterparties

9.

What is interest rate immunization in the context of bank gap management?

the strategy of holding more interest rate sensitive assets than interest rate sensitive liabilities the strategy of holding fewer interest rate sensitive assets than interest rate sensitive liabilities reducing the size of the balance sheet structuring a bank's portfolio so that its net interest revenue and/or the market value of its portfolio will not be adversely affected by changes in interest rates

10.

The weighted average duration of liabilities can be increased by:

buying additional 30-year German Government bonds selling futures contracts on 30-year German Government bonds buying futures contracts on 10-year German Government bonds exercising an early repayment option on a long-term senior borrowing

ACI-Dealing Certificate (2) Set 3

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ACI-Dealing Certificate (2) Set 3

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