ACI-Dealing Certificate (2) Set 5

1.

An interest rate swap (IRS) is:

A contract to exchange one stream of interest payments for another A temporary exchange of one deposit for another of a longer maturity in the same currency A forward-forward contract A contract to exchange an interest rate stream in one currency for another one in a different currency

2.

An important reason for trading a futures contract rather than an FRA is:

The expense of settling an FRA The reduced counterparty risk on a futures exchange The reduced basis risk on futures The superior interest rate risk on FRAs

3.

Selling a FRA has the same interest rate exposure as:

Opening a positive gap Going over-borrowed Making a forward-forward loan Taking a forward-forward deposit

4.

What is the purpose of an initial margin on a futures exchange?

To cover losses incurred between variation margin payments To exclude retail investors To pay reserve requirements To cover fees due to the clearing house

5.

What is the Overnight Index for USD?

H-15 Index Prime Rate Overnight Fed funds Fed funds effective rate

6.

Which of the following statements is correct?

An adjusted settlement amount is paid at the end of the FRA contract period that includes reinvestment interest for late payment An unadjusted settlement amount is paid at the end of the FRA contract period An adjusted settlement amount is paid at the start of the FRA contract period that is discounted for early payment An unadjusted settlement amount is paid at the start of the FRA contract period

7.

A forward-forward lender has an exposure to the risk of:

Higher interest rates Lower interest rates Flattening yield curve Parallel shift downwards in the yield curve

8.

What is the Overnight Index for GBP?

SONIA STINA STONIA EONIA

9.

Claims should be communicated in writing via e-mail or preferably by authenticated SWIFT. What information should be provided in the claim?

the details of the transaction involved, the number of days the payment was delayed and the resulting cost the details of the transaction involved, the number of days the payment was delayed and the cost, together with Central Bank rate to be applied the details of the transaction involved, the number of days the payment was delayed and the cost, together with reference rates to be applied the details of the transaction involved, the number of days the payment was delayed and the cost, together with the calculation methodology being claimed

10.

You and a dealer at another bank have a verbal bilateral reciprocal arrangement to quote each other two-way prices. During periods of high volatility, the other dealer refuses to quote to you. What does the Model Code say about this situation?

The other dealer is bound to reciprocate. This is not in any way an enforceable or binding commitment. The Model Code does not comment on dealing reciprocity. It is common market practice to suspend reciprocity in periods of high volatility.

ACI-Dealing Certificate (2) Set 5

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ACI-Dealing Certificate (2) Set 5

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