Question 1

What does the Model Code say concerning repos and stock-lending?

Options :

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

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

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

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

Answer: B

Question 2

All other things being equal, if a bank borrows short and lends long what is the effect on the liquidity risk of the bank?

Options :

A : changes only when interest rates levels are low

B : positive

C : negative

D : changes only when interest rates levels are high

Answer: C

Question 3

What usually happens to the collateral in a tri-party repo?

Options :

A : It is held by the seller in the name of the buyer

B : It is held by the tn-party agent in the name of the buyer

C : It is put at the disposal of the buyer

D : It is frozen in the sellers account with the tri-panty agent

Answer: B

Question 4

3-month USD/CHF is quoted at 12/10. Interest rates in Switzerland are reduced but USD rates (which are higher) are unchanged. What would you expect the 3-month forward USD/CHF rate to be?

Options :

A : unchanged

B : 10/8

C : 15/13

D : 6/4

Answer: C

Question 5

Mark-to-market' in a repo means:

Options :

A : Revaluing collateral

B : Revaluing collateral versus cash

C : Calculating the net replacement cost

D : Calculating net present value

Answer: B