Question 1

A dealer in the spot foreign exchange market has to assume that a price given to a voice broker is only valid:

Options :

A : until the price has been taken off' by the dealer'

B : for a short length of time, usually 30 seconds

C : for a short length of time, typically a matter of seconds

D : for a minute or two

Answer: C

Question 2

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

Options :

A : CDS provide protection against specified credit events to the party receiving the CDS premium payments.

B : CDS provide protection against the default of the trade counterparty that buys the CDS.

C : CDS provide compensation to the protection buyer, should a specified credit event occur to a third party entity.

D : CDS are used to recover funds from defaulted swap counterparties.

Answer: C

Question 3

How can material divergences between the value of cash and collateral be managed in a documented sell/ buy-back?

Options :

A : Margin maintenance

B : Either of the above, but usually (b)

C : Either of the above, but usually (a)

D : Re-pricing

Answer: B

Question 4

An 'at-the-money' call option:

Options :

A : Costs less than an 'out-of-the-money' call option

B : Costs the same as an 'in-the-money' put option

C : Costs more than an 'in-the-money' call option

D : Costs more than an 'out-of-the-money' call option

Answer: D

Question 5

If EUR/USD is 1.1025-28 and the 6-month swap is 112.50/113, what is the 6-month outright price?

Options :

A : 1.11375-1.1141

B : 1.09125-1.0915

C : None of these

D : 1.1380-1.11405

Answer: A

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