What is the meaning of CCP within the Basel framework?

A.

Collateralized Clearing Process

B.

Central Clearing Counterparty

C.

Collateralized Counterparty Protection

D.

Collateralized Credit Protection

Does the slope of the interest yield curve typically have a substantial impact on a bank’s net interest margin?

A.

No, it doesn’t, since the slope of the yield cure is unrelated to the spread between shortterm and long-term interest rates.

B.

No, it doesn’t. There isn’t any link at all between the slope of the interest yield curve and a bank’s net interest margin.

C.

Yes it does. In banking, long-term rates usually apply to bank deposits and money market borrowings whereas short-term interest rates are attached to loans and securities.

D.

Yes it does. Long-term rates usually apply to a bank’s assets (loans, securities, etc.) and
the short term interest rates are generally attached to liabilities (deposits, money market
borrowings, etc.).

EURIBOR is the:

A.

Daily fixing of EUR interbank deposit rates in the European market

B.

Daily fixing of EUR interbank deposit rates in the London market

C.

Another name for EUR LIBOR

D.

The ECB’s official repo rate

The Liquidity Coverage Ratio imposed by Basel III requires a bank:

A.

to keep enough highly liquid assets to cover its net liabilities for the next 10 days to guard against severe liquidity stress

B.

to keep enough highly liquid assets to cover its net liabilities for the next 30 days to guard against severe liquidity stress

C.

to keep enough highly liquid assets to cover its net liabilities for the next 60 days to guard against severe liquidity stress

D.

to retain enough liquidity to cover its assets against severe default risk

What would be the strategy for a bank if it is unable to speculate on interest rates and/or unable to absorb market risk?

A.

to run a zero gap

B.

to hold more interest rate sensitive assets than interest rate sensitive liabilities

C.

to reduce the size of the balance sheet

D.

to hold fewer interest rate sensitive assets than interest rate sensitive liabilities

At the end of the day, you are short CHF 3,500,000.00 against SEK at 6.9275. You are
asked to revalue your position at 6.9190. What is the resulting profit or loss?

A.

Profit of CHF 29,750.00

B.

Profit of SEK 29,750.00

C.

Loss of SEK 29,750.00

D.

Loss of CHF 29,750.00

Which one of the following statements regarding the variance-covariance method for calculating value-at-risk is true?

A.

The volatilities of the underlying assets are normally distributed and the prices remain
constant.

B.

The risk factors are normally distributed and volatilities of risk factors and correlations
between risk factors are constant.

C.

The prices of underlying assets are normally distributed, the volatilities of risk factors
follow a GARCH process and correlations between risk factors are constant.

D.

The returns of underlying assets are normally distributed and volatilities of risk factors
and correlations between risk factors are constant

If the issuer of the collateral used in a repo defaults during the term of the transaction, who
suffers the loss?

A.

Buyer

B.

Seller

C.

Issuer

D.

It depends on the agreement between the buyer and seller

What is the Repurchase Price of a classic repo?

A.

The market value of bond collateral at the end of the repo at the clean price of the bond

B.

The market value of bond collateral at the end of the repo at the dirty price of the bond

C.

The amount of cash actually paid for collateral at the start of the repo

D.

The amount of cash actually paid for collateral at the start of the repo plus repo interest

What happens when the issuer of a bond being used as collateral in a classic repo fails to
pay a coupon on the bond during the term of the repo?

A.

The transaction is terminated and the collateral is returned to the seller

B.

The transaction is rolled over until the coupon is paid or the issuer becomes insolvent, at
which point the seller becomes an unsecured creditor of the issuer

C.

The buyer is obliged to make a manufactured payment to the seller and becomes an
unsecured creditor of the issuer

D.

The buyer is not obliged to make a manufactured payment to the seller but the buyer is
likely to ask for margin