ACI 3I0-012 ACI Dealing Certificate Exam Practice Test

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

A prerequisite for hedge accounting is that a hedging instrument is designated as an offset to changes in the fair value or cash flows of a hedged item.

Hedge accounting enables gains and losses on a hedging instrument to be recognised in the income statement in the same period as offsetting losses and gains on the hedged item.

If one of the criteria for hedge accounting is no longer met, there is an option to discontinue hedge accounting.

Strict criteria must be met at inception and throughout the term of the hedge relationship in order for hedge accounting to be applied.

Sell and buy GBP/USD T/N

Buy and sell GBP/USD T/N

Sell GBP/USD spot, and sell and buy GBP/USD T/N

Buy GBP/USD spot, and buy and sell GBP/USD T/N

MTn99

MT300

MT370

MT670/671

6.5825

6.5820

6.5815

6.5830

It is recommended that ECNs have mechanisms that control price flashing

A manual kill button that disables the system’s ability to trade and cancels all resting orders may not be established without Central Bank approval

The sudden withdrawal of a specific credit limit or limits in a tactical manipulation to mislead the market is unethical

Algorithms require appropriate supervision performed by staff with commensurate levels of experience

Between +0.5 and +1

+0.5

Between 0 and +0.5

Zero

to extend the contract to the next business day

to shorten the contract to the previous business day

The two parties involved agree to a new maturity date.

There is no standard market practice. ACIs Committee for Professionalism decides the issue on a case-by-case basis.

as a EUR 25,000,000.00 6-month liability and a EUR 25,000,000.00 12-month asset

as a EUR 25,000,000.00 12-month liability and a EUR 25,000,000.00 6-month asset

as a EUR 12,500,000.00 6-month liability and a EUR 12,500,000.00 12-month asset

as a EUR 12,500,000.00 6-month asset and a EUR 12,500,000.00 12-month liability

Such documentation should be bi-laterally signed by the dealers of both principals intending to transact business.

When using such agreements... the wording in the agreement must be changed to match the actual transaction details after trading.

Such documentation should be signed, in many cases before any applicable market transactions are entered into.

For instruments where standard terms do not exist, the Model Code recommends that no documentation should be used.

open and effective communication channels between all levels of staff and cross-functions should be maintained.

regular internal audits should be carried out together with trading and risk management to ensure early identification of internal control weaknesses

complete segregation of duties between the front, middle and back office activities

a separate system for independent monitoring to ensure compliance with the risk management framework should be in place

104.14

104.21

104.23

104.30

a synthetic forward

a straddle

risk reversal

a strangle

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

The expected appreciation or depreciation of the base currency

The expected appreciation or depreciation of the quoted currency

Largely, the interest rate differential between two currencies

Solely, the interest rate differential between two currencies

Raise USD interest rates

Lower USD interest rates

Lower reserve requirements

It could not squeeze you

The transaction should be concluded and the broker should inform both counterparties accordingly.

The dealer who hits the broker’s price may decide whether the deal is done or not; the broker should inform both counterparties accordingly.

The deal should not be concluded and the broker should inform both counterparties accordingly.

The broker should immediately inform both counterparties that the deal will have to berenegotiated.

Sell a 1x3 FRA at 0.42%

Buy a 1x3 FRA at 0.45%

Buy a 1x4 FRA at 0.58%

Sell a 1x4 FRA at 0.54%

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

anywhere, even away from their own dealing premises

after-hours, but only if listed as such by management

after-hours, but only from their private residence

away from their broker’s dealing premises

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

The broker must show the borrower’s name to the lender first and disclose the lender’s name only if the borrower is acceptable to the lender.

The broker must show the lender’s name to the borrower first and disclose the borrower’s name only if the lender is acceptable to the borrower.

The broker must show the borrower’s and lender’s names to each other at the same time.

For marketing reasons, the broker can show the lender’s name to the borrower at any time.

8.30%

8.52%

8.54%

8.69%

105.50

105.61

10555

0.009474

Between -0.5 and -1

-0.5

Between +0.5 and +1

+0.5

Pay fixed and receive floating through swaps for the term of the portfolio

Pay floating and receive fixed through swaps for the term of the portfolio

You cannot: the maturity of the swaps would be longer than that of the deposits

You should not: there would be too much basis risk

The sensitivity of the option value to changes in interest rates

The sensitivity of the option value to changes in volatility

The sensitivity of the option value to changes in the time to expiry

The sensitivity of the option value to changes in the price of the underlying

You will have to pay USD 5,925.00

You will receive USD 5,925.00

You will have to pay USD 3,675.00

You will receive USD 3,675.00

It is good practice to collect and disclose incidents and near-misses for the future benefit of the professional community.

It is good practice to collect and analyze incidents and near-misses so as to set up preventive action plans for the future.

A report describing operational risks should be made at the request of the front office.

A report describing operational risks should be made at least once a year and provided to the front office.

At maturity

Annually

Semi-annually

Quarterly

Treasury bill

CD

Interbank deposit

Classic repo

350%

750%

1250%

1500%

Technically impossible on electronic platforms

Not an uncommon practice and something which professional dealers should be able to guard against.

Not good practice.

A criminal offence.

Internal Risk Based

Internal Ratings Based

Intrinsic Risk Based

Internal Rule Based

0.9849

1.0154

1.9759

0.5061

EUR 27,947,276.43

EUR 27,946,077.08

EUR 27,950,071.43

EUR 27,948,871.97

The dealer should not reveal his future dealing intentions to his counterparty.

The dealer should make his intention to assign clear before transacting.

The dealer should agree the method of assignment before transacting.

The counterparty should specify whether or not assignment would be acceptable in negotiations.

You receive USD 12,330.46

You pay USD 12,330.46

You pay USD 12,163.81

You receive USD 12,163.81

Immediately after the deal is done.

As quickly as possible after the deal is done.

By electronic media only, e.g. fax, telex.

Not later than the value date of the first leg of the transaction.

0.8500

0.8506

0.8512

0.8505

Eurocertificate of deposit

US Treasury bill

CP

All of the above

they have good track records in dealing both for their institution and for themselves

there have been no previous conflicts of interest in the dealing room

there is a clearly defined and written policy about the matter

the dealers see no conflict of interest in such dealing

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

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

The broker is not obligated to reveal the connection provided Chinese Walls are in place.

The broker is not obligated to reveal the connection in the professional market.

The broker should advise the other counterparty of the connection.

The matter is covered in the Model Code.

the tenth of the following months: March, June, September and December

the third Wednesday of January, April, July and October

the Monday before the third Wednesday of March, June, September and December

the third Wednesday of March, June, September and December

The confirmation takes precedence as it is a written contract.

The matter will have to be submitted to arbitration in order to establish the mutual intent of the parties.

It depends on local law.

The verbal agreement is binding.

That the Master FX Give-Up Agreement (FMLG - New York FED FXC) published by the Foreign Exchange Committee can be used for this purpose.

That this agreement need not specify the permitted transaction types, tenors or credit limits.

That this agreement must include instructions that the prime broker must advise the executing dealer promptly of trades for give-up.

That this agreement should not involve any requirement for the executing dealer to inform the prime broker of the material terms of the transaction once a trade has been executed.

never

Only for very large movements and longer terms

always

spot is the principal influence

Central bank.

Senior management of the bank and the brokerage firm.

Head of compliance.

ACI’s Committee for Professionalism (CFP).

2.1890

2.2125

2.1895

2.1885

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.

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.

Is recommended where the complications of the transaction warrant the practice.

Is strictly forbidden.

Is considered bad practice.

Must have senior management approval.

When the bank’s income is secured on the trade.

If the unsecured credit is taken into account.

It the bank knows the customer very well.

When there are written procedures and policies for such transactions.

He is confident that the dealer will not back out of the deal.

Both parties have established credit lines for each other.

One party acknowledges interest.

He receives verbal acknowledgement from the dealer.

Short USD 1.5 million at 130.46

Long USD 1.5 million at 130.46

Short USD 1.5 million at 131.60

Long USD 1.5 million at 131.60

+206

+197

-195

-204

The CME eurodollar futures contract has a tick value (for one full basis point equivalent) of USD25 and a face value of USD 1,000,000

The Euronext. LIFFE EURIBOR futures contract has a tick value (for one full basis point equivalent) of EUR25 and a face value of EUR 1,000,000

The Euronext.LIFFE CHF futures contract has a tick value (for one full basis point equivalent) of CHF25 and a face value of CHF 1,000,000

All of the above

Initially by fax or other acceptable electronic means, then in writing.

Only if the deal is between overseas counterparties and for value today.

Only if the transaction is not for a marketable amount.

To both counterparties immediately by fax or other acceptable electronic means.

0.6675

0.6715

0.6717

0.6718

The value date of the centre which is open.

The next business day of the centre which is closed.

The next business day when both NewYork and Tokyo are open.

None of the above.

Be carried out at least three times a day.

Be agreed between the parties.

Be done at the end of each day.

Be decided by the broker.

+121

+120

-116

-119

0.8963

1.1157

1.1159

1.1160

Sell 3x6

Buy 3x6

Sell 4x7

Buy 4x7

ACT/365

ACT/360

ACT/ACT

30E/360

know whether the European Central Bank or the Federal Reserve is in the market before quoting

be sure that the quoting bank’s prices are not shared with other brokers

get the price from a bank or a bid and an offer from different banks in order to make a two-way price, because the broker cannot make prices on his own

make sure that the quoting banks have sufficient credit lines

USD rates are higher than CAD rates in the 6-month

CAD rates are higher than USD rates in the 6-month

There is a positive USD yield curve

There is not enough information to decide

0.8345-53

0.8345-50

0.8349-50

0.8349-53

is a new rule that compares liquid asset levels in banks to their available equity capital

spells out a modernized system for calculating the required minimum reserve that banks must hold at the central bank

compares liquid and reliably liquidating assets to expected cash outflows from specified run-off rates for various liability classes under a short-term stress scenario

tied directly into the internal ratings-based approach for determining the liquidity of credit-counterparties

H-15 Index

Prime Rate

Overnight Fed funds

Fed funds effective rate

To cover losses incurred between variation margin payments

To exclude retail investors

To pay reserve requirements

To cover fees due to the clearing house

the last calendar day of the month

the last bank business day of the month

value last business day of the month against first business day of the next month

value first business day of the month against last business day of the same month

Display the names of those users along their prices

Offer pre-trade anonymity to users quoting prices

Offer pre and post-trade anonymity to users quoting prices

Offer users the choice of whether to remain anonymous

CHY

CNR

CHR

CNY

1.0759

0.9299

1.5909

0.9295

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

If interest rates rise, the market value of equity will increase

If interest rates rise, the market value of equity will decrease C. The bank is immunised from changes in interest rates.

The market value of equity will decrease due to an increase in interest rates

added to spot

subtracted from spot

a negative value

Insufficient information to decide

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 potential buyer of EUR against RUB

speculating on an appreciation of the Russian Rouble

expecting rising EUR/RUB exchange rates

a seller of Russian Rouble

A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days.

A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days.

A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days.

A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

only if they are dealing with brokers

only if dealing on an e-trading platform

only if they are dealing in non-marketable amounts

always

6.4250

6.3810

6.7850

6.3890

It is now a widely accepted standard that banks should use a single representative transfer price across the entire maturity spectrum.

Modern matched-maturity pricing systems include an additional liquidity surcharge that is specifically applied to more liquid short maturities.

Matched-maturity transfer prices should represent a weighted average cost of capital that incorporates the cost of equity into the cost of borrowed funds.

Modern matched-maturity systems differentiate transfer prices by the maturity of the commitment and also apply a marginal funding cost perspective.

Profiles for functions are encouraged and should be reviewed semi-annually by a manager.

Developers should have unrestricted access to production systems.

Access to production systems should be rigorously controlled.

Users should not have access to change system functionalities.

You pay CAD 20,000.00

You receive CAD 20,000.00

You pay CAD 19,952.61

You receive CAD 19,952.61

28th March

29th March

30th March

31st March

you would take as bid rate the bid side of the 2-month forward and as offered rate the offered side of the 1-month forward

you would take as bid rate the offered side of the 2-month forward and as offered rate the bid side of the 1-month forward

you would take as bid rate the offered side of the 1-month forward and as offered rate the offered side of the 2-month forward

you would take as bid rate the bid side of the 1-month forward and as offered rate the bid side of the 2-month forward

Semi-annual bond yield of 3.75%

Annual bond yield of 3.75%

Semi-annual money market yield of 3.75%

Annual money market rate of 3.75%

4.19%

4.25%

4.30%

4.31%

> 2% of 6 months forward earnings

> 20% of regulatory capital

<10% of regulatory capital

< 5% of 12 months forward earnings

Unchanged

Move towards 28/31

Move towards 5 7/60

Insufficient information

A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank

A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level

A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels

A bank enters into a receiver’s swap while interest rates are increasing

SGD

PLN

GBP

NZD

EUR

JPY

HKD

AUD

the Canadian “Maple Leaf”

the South African “Krugerand”

the American “Gold Eagle”

the United Kingdom “Sovereign”

149.66-74

149.69-71

63.52-53

63.51-54

3.2281%

3.2278%

3.00%

2.875%

8% of RWA plus conservation buffer

10.5% of RWA plus conservation buffer

8% of RWA plus countercyclical buffer

10.5% of RWA plus countercyclical buffer

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

EURIBOR

EONIA

LIBOR

SONIA

buy a strip of 0x6, 6x12, 12x18 and 18x24 FRAs

sell a strip of 0x6, 6x12, 12x18 and 18x24 FRAs

buy a strip of 6x12, 12x18 and 18x24 FRAs

sell a strip of 6x12, 12x18 and 18x24 FRAs

Borrowed CAD 20,000,000.00 at 1.06%

Lent CAD 20,000,000.00 at 1.11%

Borrowed CAD 20,000,000.00 at 1.11%

Lent CAD 20,000,000.00 at 1.06%

ACT/365

ACT/360

ACT/ACT

30E/360

A cash instrument

An exchange traded derivative

An interest rate derivative

A balance sheet instrument

CD

Interbank deposit

Classic repo

Treasury bill

AnFRA

An option on an FRA

A collar

AnIRS

the price differential between spot and forward gold prices

the rate at which dealers will lend gold against US dollars

the implied forward price of gold

the price of gold for forward delivery

deduct points from the broker or adjust the brokerage bill accordingly

in some centres, ask either the central bank or some other neutral body to investigate and confidentially verify that there was support for the original price or rate

in some centres, ask the local ACI to investigate and confidentially verify that there was support for the original price or rate

insist that the broker discloses the name of the other counterparty