Question 1

Which of the following is the best description of a broken trade”?

Options :

A : When a trade has been agreed to with dates (maturities) different from the standard dates

B : When one of the parties to the deal unilaterally decides to withdraw from the on-going transaction

C : When, due to a system break, one or both parties to the deal chooses to withdraw from the ongoing transaction

D : When, due to a system break, one or both parties to the deal are unclear as to whether the deal has been done

Answer: D

Question 2

Herstatt Risk is also known as:

Options :

A : settlement risk

B : translation risk

C : replacement risk

D : operational risk

Answer: A

Question 3

On the sale of a CD, the seller

Options :

A : receives a lower price than he originally paid

B : receives a higher price than he originally paid

C : receives a price calculated using the price originally paid

D : there is not enough information to know how much the seller receives

Answer: D

Question 4

You find that you have paid an amount to the wrong counterparty. What action should you take?

Options :

A : wait until the counterparty contacts you to before deciding what to do

B : immediately contact the counterparty to find the most appropriate way to have the funds returned as quickly as possible to minimize the loss of value days

C : ask the counterparty to keep the money and to place (invest) it at a special rate

D : ask your accounting department to book the amount as a loss

Answer: B

Question 5

What is a settlement date?

Options :

A : The date by which the interest payment on an operation must be made

B : The last date by which the minimum reserve amount can be paid to the central bank

C : The date, on which settlement must be made on the contracted amount or the differential amount of an operation

D : The date a deal is processed

Answer: C

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