ACI 3I0-012 ACI Dealing Certificate Exam Practice Test

At maturity

Annually

Semi-annually

Quarterly

The following Monday

Saturday

Sunday

The previous Friday

A loss of at least EUR 5,000,000.00 can be expected in 99 out of the next 100 weeks.

A loss of at most EUR 5,000,000.00 can be expected in 1 out of the next 100 weeks.

A loss of at most EUR 5,000,000.00 can be expected in 1 out of the next 100 days.

A loss of at least EUR 5,000,000.00 can be expected in 1 out of the next 100 weeks.

he is unsure about the presence of a currency risk

the amount of the currency risk is not precisely known in advance

his currency risk might change over time

the precise maturity of the currency risk is not known

Substantial opportunity for gain and limited risk of loss

Substantial risk of loss and substantial opportunity for gain

Limited risk of loss and limited opportunity for gain

Substantial risk of loss and limited opportunity for gain

the credit spread is decreasing

the credit spread is decreasing and recovery rate is increasing

the credit spread is increasing

the recovery rate is increasing

To anticipate lower volatility in the price of the underlying commodity

To anticipate moderately high volatility in the price of the underlying commodity

To anticipate increasing volatility in the price of the underlying commodity

To anticipate very high volatility in the price of the underlying commodity

9.5836

6.2834

0.1591

0.1043

The Head of Operations has the sole responsibility of ensuring the correctness and validity of the SSI set up.

SSIs should be stored and maintained in the bank’s general static data system.

Each institution should have a separate SSI team to prevent I minimise the potential risk of fraud.

SSI staff should be fully integrated within Operations to insure consistent and reliable settlement guidelines.

all legal disputes

disputes related to market practice or conduct as set out in the Model Code or in any other Code of Conduct

disputes between two market participants, at least one of them being a member of ACI

disputes related to over-the-counter financial instruments as detailed in appendix four of the Model Code

only after consultation with the local regulator

only if the switching transaction is done at the current market rate

only provided that such transactions are identified as switching transactions

only after approval by the broker’s senior management

is a contract by which the maturity of a regular FX swap can be extended at an historic (noncurrent) rate

is a swap transaction where the near leg is traded either value today or value tomorrow and the far leg is traded spot

is a swap that does not start spot and where both the near and the far leg are traded forward

is a transaction by which a maturing outright forward FX is prolonged at an historic (non-current) rate

should never reveal their future dealing intentions to their counterparties

should make clear their intention to do so when initially negotiating the deal

should agree upon the method of assignment before transacting

should only reveal any such intentions after the confirmations have been exchanged

350%

750%

1250%

1500%

Created an exposure to the CHF

Created an exposure to the USD

Switched a CI-IF asset temporarily into USD without taking currency risk

Switched a USD asset temporarily into CHF without taking currency risk

You will pay a net settlement amount

You will receive a net settlement amount

There will be an exchange of gross interest payments in 2 business days

There will be an exchange of gross interest payments in 3 months

Long a straight bond + pay fixed on a swap = long a synthetic Floating Rate Note

Long a straight bond + pay floating on a swap = long a synthetic Floating Rate Note

Short a straight bond + receive fixed on a swap = long a synthetic Floating Rate Note

Short a straight bond + pay fixed on a swap = long a synthetic Floating Rate Note

Collateralized Clearing Process

Central Clearing Counterparty

Collateralized Counterparty Protection

Collateralized Credit Protection

Amendments to customer standing data should be subject to 4 eyes control and only changed if the appropriately authorized documentation is provided.

The set up of settlement instructions and the confirmation method should be fixed when setting the first transaction.

No trading should be done without first identifying and setting up the counterparty.

Counterparty identification and setup of settlement instructions should be completed in less than 2 working days.

Legal documentation must be put in place as soon as possible after transaction.

All market participants should use the Modified Previous Business Day Convention.

The exact maturity (end) dates for transactions must be agreed as soon as possible after a transaction.

All market participants should use the Modified Following Business Day Convention.

A manual “kill button” to disable the system’s ability to trade and cancel all resting orders.

An ‘inbound message rate” feature that monitors the number of confirmation messages that are sent from trading venues within a specific time period.

A “repeated automated execution throttle” monitoring the frequency of strategies that are filled and then re-entered into the market without human intervention through automated trading systems.

A “fat-finger quantity” feature limiting the size of orders that can be sent from the trading systems and preventing order quantities above the fat-finger limit from leaving the system.

1,239,925.60

1,237,873.80

1,240,694.79

1,242,720.50

1.4242

1.4232

1.4246

1.4237

No deal is done and the broker should inform both counterparties accordingly.

The deal is done and the broker should inform both counterparties accordingly.

The matter should be resolved in consultation with senior management of the 3 institutions.

The ACI’s Committee for Professionalism will investigate and advise accordingly.

frequency trading

high-incidence trading

flash trading

liquidity aggregators

Instruments qualifying for recognition as Tier 1 or Tier 2 capital will be substantially restricted.

Basel III does not include Tier 3 capital

There is a distinction between upper Tier 2 and lower Tier 2 capital

New non-common equity Tier 1 and Tier 2 instruments are more loss-absorbing than previously

Nothing, as he changed the terms of the deal

EUR 5,000,000.00

More than EUR 5,000,000.00, but a maximum of EUR 8,000,000.00

EUR 8,000,000.00

a given deposit with a term of six months

a taken deposit with a term of three months

a given deposit with a term of three months and a taken deposit with a term of six months

a taken deposit with a term of three months and a given deposit with a term of six months

2nd March

1st March

2gth February

28th February

matching should be performed by no later than the day after trading day

matching processes are manual and may not be automated

matching should be performed as soon as possible upon receipt of the confirmation

confirmation matching should be a post-settlement workflow activity

to run a zero gap

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

to reduce the size of the balance sheet

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

3.2281%

3.2278%

3.00%

2.875%

The same day they are dealt

Promptly

Within 24 hours of execution

Within an hour of execution

CLS settlement members may rescind instructions unilaterally provided that the rescind messages reach the CLS Bank before the 00:00 CET deadline.

CLS settlement members may rescind instructions unilaterally provided that the rescind messages reach the CLS Bank before the 06:30 CET deadline.

CLS settlement members may rescind instructions bilaterally only if the rescind messages reach the CLS Bank before the 00:00 CET deadline.

CLS settlement members may rescind instructions bilaterally only if the rescind messages reach the CLS Bank after the 06:30 CET deadline.

Net interest income would increase slightly.

Net interest income would increase considerably.

Net interest income would decrease.

Net interest income would hardly change at all.

15

20

35

40

Margin maintenance

Re-pricing

Margin maintenance or re-pricing, but usually margin maintenance

Margin maintenance or re-pricing, but usually re-pricing

Costs more than an ‘in-the-money’ call option

Costs less than an ‘out-of-the-money’ call option

Costs more than an ‘out-of-the-money’ call option

Costs the same as an ‘in-the-money’ put option

Raise USD interest rates

Lower USD interest rates

Lower reserve requirements

It could not squeeze you

the gold price fixed twice a day to balance supply and demand in the London bullion market

the gold price fixed at the end of the day in the London bullion market

the gold price fixed at 11:00 am. local time in the London bullion market from a panel of gold traders

the gold price fixed at 11:00 a.m. to settle gold contracts in the London bullion market

Interest rates in different currencies will tend to move into line with each other over time

Interest rates in different currencies differ due to differences in expectations about inflation

Selling a low interest rate currency to invest a high interest rate currency will only be profitable if one hedges the currency risk

Selling a low interest rate currency to invest in a high interest rate currency should not be profitable if one hedges the currency risk

1.42%

1.39%

2.01%

4.21%

Seller

Buyer

Issuer

It depends on the agreement between the buyer and seller

0.25%

0.375%

0.75%

0.50%

the expected loss on the portfolio in the worst 95% of cases

the expected loss in those cases where the loss exceeds the VaR at the 95% level

the maximum loss in those cases where the loss exceeds the VaR at the 95% level

the expected loss in those cases where the loss exceeds the VaR at the 5% level

Loss Given Default

Liquidity Given Distress

Limit Given Default

Loss Given Distress

claims of less than USD 100.00

claims of less than USD 1,000.00

claims of less than EUR 100.00

claims of less than EUR 1,000.00

A spot sale (purchase) and a forward purchase (sale)

A spot sale (purchase) and a forward sale (purchase)

An exchange of currencies on a date beyond spot and at a price fixed today

An exchange of currencies on a date beyond spot

2.60%

2.75%

2.775%

2.813%

Will examine the complaint.

May consult with the local ACI.

Will bring the matter to the attention of the local regulator.

None of the above.

You will have to pay USD 612.50

You will receive USD 612.50

You will have to pay USD 3,675.00

You will receive USD 3,675.00

USCP

ECP

Treasury bill

BA

When one of the principals confirms the deal.

When the principals give a written undertaking for all deals done at the end of the day.

When an acknowledgement is received from the principal that the deal is done.

When both back offices acknowledge the deal.

The deal is done. You should confirm with your counterparts.

If the knock-in is confirmed by a New York price source, the deal is done and you should confirm with your counterparty.

The recognised closing time for the currency markets is 6:00pm New York time in Friday, so the deal is done and you should confirm with your counterparty.

The recognised closing time for the currency markets is 5:00pm NewYork time in Friday, so no deal is done.

0.7291-94

0.7294-91

1.3710-15

None of these

EUR 5,798,982

EUR 5,799,497

EUR 5,746,376

EUR 5,000,694

Treasury bill

CD

BA

USCP

The Model Code is published by ACI’s Committee for Professionalism.

The Model Code sets out the practicalities of dealing in those financial instruments listed in the Model Code.

The Model Code is an attempt to deal with the legal issues relating to every conceivable financial instrument.

The Model Code sets out the manner and spirit in which foreign exchange and money market business should be conducted in order that participants maintain high standards of professionalism, integrity and ethical conduct.

To anticipate very low volatility in the price of the underlying commodity

To anticipate moderately high volatility in the price of the underlying commodity

To anticipate moderate volatility in the price of the underlying commodity

To anticipate very high volatility in the price of the underlying commodity

4,816,500.00

1,868,809.57

1.868,576.77

4,815,900.00

Be conducted out at the end of the morning and afternoon trading sessions.

Be only be conducted after the close of business.

Be mutually agreed between the bank and the broker or counterparty.

Be the responsibility of the broker.

Prior management approval has been sought.

They are executed within six months.

They are extended for not more than one year.

All of the above.

EUR 25,962,011.01

EUR 25,959,714.91

EUR 25,948,878.47

EUR 25,948,648.82

+121

+120

-116

-119

Gambling and betting between market participants should be strongly discouraged.

Gambling and betting between market participants can be allowed if it is monitored by management.

Gambling and betting between market participants should be forbidden.

All of the above.

GBP 47,875,000.00

GBP 49,462,847.22

GBP 49,470,205.48

GBP 49,475,760.27

Sell

Sell and subsequently buy back

Sell and borrow

Sell, borrow and buy back simultaneously

(i), (ii), (iii), & (iv).

(i), (ii) & (iii).

(i) & (iii).

none of the above.

On an special number known only to the chief dealer.

On a number located in the office of the internal auditor.

Secured so that reported transactions cannot be erased without senior management approval.

Secured by recordings that are stored for a suitable period.

A short put option + long call option at the same strike price

A long put option + short call option at the same strike price

A short put option + short call option at the same strike price

A long put option + long call option at the same strike price

overnight, tom-next and spot-next

maturities up to one week

maturity dates of less than one month

maturity dates of less than 10 days

pay 250, receive 1,250, receive 1,750, receive 2,000

receive 250, pay 1,250, pay 1,750, pay 2,000

pay 2,500, receive 12,500, receive 17,500, receive 20,000

receive 2,500, pay 12,500, pay 17,500, pay 20,000

Long EUR 1.5 m at 1.0984

Short EUP 1.5 m at 1.1036

Long EUR 1.5 m at 1.1012

Short EUR 3.0 mat 1.1025

a five-year liability and a three-month asset

a five-year asset and a three-month liability

a five-year asset only

a three-month liability only

the monetary authority in the country where the broker is located

the banking association in the country where the bank is located

the Committee for Professionalism of the ACI

the local foreign exchange market committee

Treasury bill

CD

ECP

Classic repo

Require greater vigilance by the management and staff.

Take particular care when the beneficiary is a third party to the deal.

Ensure that details of all telephone deals which do not include pre-agreed standard settlement instructions are confirmed by telex or similar means without delay.

All of the above.

Bid/offer spread

Flow information

Relationships

All of the above

21.5/21

210/215

215/210

21/21.5

The original rate of the transaction

The original rate of the transaction adjusted by the relevant forward points

The affected parties should agree to adjust the exchange rate according to the prevailing relevant forward mid swap points at the time the bank holiday is announced

The rate is open to negotiation by the two parties

To confirm an FX transaction

To advise the netting position of a currency in NDFS

To advise changes in SSIs

To confirm a MM transaction

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

BBA LIBOR

Fed funds

ISDALIBOR

EURIBOR

1.32%

1.29%

1.28%

0.65%

ARP

ARS

ARA

AED

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.

the traded volume

the historical volatility of the price of the underlying commodity

the style (European or American) of the option

the implied volatility of the price of the underlying

Higher interest rates

Lower interest rates

Flattening yield curve

Parallel shift downwards in the yield curve

Thursday 27th June

Friday 28th June

Saturday 29th June

Monday 1st July

1.4494

1.4499

1.4504

1.4586

To cover losses incurred between variation margin payments

To exclude retail investors

To pay reserve requirements

To cover fees due to the clearing house

SEK interest rates are higher than NOK interest rates

NOK interest rates are higher than SEK interest rates

NOK interest rates are higher than USD interest rates

SEK interest rates and NOK interest rates are converging

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

capital adequacy regulations in Pillar 1

market risk and Tier 3 capital elements

internal management procedures subject to supervisory review in Pillar 2

market discipline, disclosure and transparency in Pillar 3

usually the current spot EUR/USD mid-market rate

commonly the prevailing 4-month forward EUR/USD mid-rate

always the forward EUR/USD bid rate of the first swap leg

generally the prevailing 2-month forward EUR/USD mid-rate

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

has the option to fulfill the outright forward or not at maturity

may freely choose the maturity, given a 24-hour notice to the bank

can choose any maturity within a previously fixed period

may decide to deal at the regular maturity or on either the business day before or after

Unilateral collateral obligations to sovereign counterparties provide liquidity to banks.

Under Basel III commercial banks are most likely to incur lower costs to service their sovereign clients.

While banks usually do not call for collateral from sovereign counterparties, they must provide collateral for the offsetting hedge transactions which are undertaken with commercial counterparties.

Uncollateralised exposures to sovereign counterparties will not require additional regulatory capital to be set aside against potential credit losses

28th March

29th March

30th March

31st March

GBP 1,997,253.78

GBP 1,997,291.34

GBP 1,997,287.67

GBP 1,997,250.00

the value date of the financial centre that is open

the next business day of the financial centre which is closed

the next business day when both New York and Tokyo are open

the previous business day when both New York and Tokyo are open

1.0352

1.0353

1.0347

1.0348

at least 995/1000 pure gold; weight between 350 and 430 fine ounces

minimum 999.9/1000 pure gold; weight between 350 and 430 fine ounces

at least 995/1000 pure gold; weight of 400 fine ounces

minimum 995/1000 pure gold; weight of 400 fine ounces

a term the quoting dealer uses to caution the receiver of the quote that the price may have to be re-quoted at the receiver’s risk

the qualification that the rate quoted in the market may no longer be valid and requires confirmation before any trades can be agreed upon

the statement that the rates quoted by the broker are for indication only

an acknowledgement by the dealer receiving the quote that the rate may have to be re-quoted at the receiver’s risk

He buys CHF 5,000,000.00 at 0.9423

He buys CHF 5,000,000.00 at 0.9426

He buys USD 5,000,000.00 at 0.9423

He buys USD 5,000,000.00 at 0.9426

The risk of an adverse change in the futures price

The risk of an adverse change in the spread between futures and cash prices

The progressive illiquidity of a futures contract as it approaches expiry

The risk of a divergence between the futures price and the final fixing of the underlying interest rate

coordinated limit management of a financial institution’s credit portfolio

running a matched trading book

monitoring credit quality of assets and establishing a early warning system

managing the financial risk of the bank by protecting it from the adverse effects of changing interest rates

6.4250

6.3810

6.7850

6.3890

EUR 1,388,89

EUR 1,561.11

EUR 2,255.56

EUR 2,951.39

Both parties know what their future payments will be at the outset of the swap

There is payment of principal at maturity

Payments are always made gross

The fixed rate payer knows what his future payments will be at the outset of the swap

ECP

Repo

Interbank deposit

CD