This Foreign Exchange Certification Quiz assesses knowledge in forex trading strategies, risk management, and market analysis. It is designed for professionals and students in finance, emphasizing practical applications and theoretical understanding of currency markets.
It will be lower
It will be higher
It is impossible to say as it depends on the level of implied volatility
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This is a capital-protected investment since the investor deposits money and buys an option. However the coupon is conditional on spot reaching a ceratin level
This is not a capital-protected investment since the investor deposits money and sells an option. In any case the coupon is conditional on spot reaching a ceratin level
This is a capital-protected investment since the investor deposits money and buys an option. In any case, the coupon is guaranteed.
This is not a capital-protected investment since the investor deposits money and sells an option. In any case, the coupon is guaranteed.
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The price achieved by plugging the historical volatility into Black and Scholes formula
The price achieved by plugging the market volatility into Black and Scholes formula
The price achieved by plugging the ‘at the money’ volatility into Black and Scholes formula
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Run the pricing table on this structure
Backtest a 1 year one touch with a trigger at 1.4
Check whether the one year forward rate is above or below 1.4
Backtest the forward extra you have priced
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Compare the performance of his portfolio to the performance of forwards
Show the worse case scenario for his entire portfolio with a confidence level of 95%
Assess potential losses on his position based on simultaneous shifts of spot and volatility
View a matrix of the influence of spot, time and interest rate changes on his portfolio
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Risk Reversal
Participating Forward
Forward Extra
Straddle
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Using digital options, with binary payouts, in order to improve the strike attached to the protection leg of strategies.
Options have leveraged payoffs, which by definition, offer the client potential protection levels at preferable rates to simply forwards.
Creating strategies where the sell (funding leg) has a greater notional than the buy (protection leg) in order to achieve more attractive strike levels.
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The market finishes at $1.20 and they exercise their option when it is ITM and sell at $1.30.
The market rises to $1.45 on expiry without touching $1.50 and the company has no obligation from the forward extra.
The market rises to $1.60 and finishes at $1.49 on expiry.
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Use the solver to solve for the financing leg strike of the risk reversal for the ask price of -$5000
Use the solver to solve for the financing leg strike of the risk reversal for the bid price of -$5000
Generate the pricing table and find the parameters that make the price $5,000
It is impossible to tell him how to do this as he is pricing a zero cost structure
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It is possible to upload his own data. The system will then adjust volatility data for other currency pairs based on what he uploaded for EUR/USD.
It is possible to upload his own data for EUR/USD. The system will use SD data for other currency pairs.
This is not possible as SD's main advantage is that we show non-biased independent market data.
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USD put JPY call, expiry one year
USD call JPY put, expiry one year
USD call JPY put, expiry one month
USD put JPY call, expiry three months
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True
False
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They will exercise their option and receive $12.5m.
They will not exercise their option since it will not breakeven.
They will exercise their option and receive $11.9m.
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The corporate should receive 10K but in fact the bank is keeping this as a sales margin
The structure actually costs $10k but because of the CVA adjustment they don’t need to pay anything
$10k is a negligible amount on this size of notional therefore requiring no payment by the corporate
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True
False
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Only on the expiry date
Any time from the trade date to expiry
When the expiry is set to 10:00 AM New York time
Only by an American bank with clearinghouse acceptance
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They are NOT exposed since the amount of their US sales is known in advance
They are NOT exposed since the Euro forward rate is higher than the spot rate and therefore the Euro is expected to rise
They would like protection against the Euro weakening against the USD
They would like protection against the Euro strengthening against the USD
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It means the volatility is cross-calculated
It means the volatility is stale
It means the volatility is about to change
It means the volatility is from one source
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A. The strike of the options is the prevailing forward rate
B. Zero cost risk reversal
C. Risk reversal with total premium of -10,000
D. Both A & B
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The market data of the Quanto's underlying currency pair
The market data of the currency pair created as a result of the payout currency
The correlation between the underlying currency pair and the currency pair created as a result of the payout currency
All of the above
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True
False
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Short dated, ATM option.
Long dated, ATM option.
Long dated, deeply OTM option.
Long dated, deeply ITM option.
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1.4250
1.3350
1.3260
1.3251
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Buy a call and sell a put both at 25d, thus creating a 25d risk reversal
Buy a strangle
Sell a strangle
Sell a double-one-touch (DOT) with triggers at 25d call and 25d put
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Buy EUR/USD call expiry 12 months notional on $5M
Buy EUR/USD put expiry 12 months notional on $5M
Buy a t compound option expiry 6 months for a 6 month EUR/USD put
Buy a 12 month fader with monthly notional accumulating only if the EUR/USD rate is below 1.30
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It will increase i.e. the upfront will be higher (example - change from -250K to -350K), since the client will reach the target quicker and have less value
It will reduce i.e the upfront will be lower (example - change from -250K to -150K), since selling at a higher rate is always preferable for the client
Is it impossible to say as the upfront could go up or down depending on the probability of reaching the target per expiry
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TARF
Accumulator
Fader
Strip of Forward Extra's.
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1 year investment with converstion rate at 1.35
1 year investment with converstion rate at 1.25
6 months investment with converstion rate at 1.35
6 months investment with converstion rate at 1.25
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The analytic delta will be higher than the TV delta due to the higher vol
The analytic delta will be higher than the TV delta due to the lower vol
The impact of the higher vol on the delta can’t be predicted
The analytic market delta is always higher than the TV delta, regardless of vol
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