What Do You Know About Numerix Company? Trivia Questions Quiz

20 Questions | Total Attempts: 92

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What Do You Know About Numerix Company? Trivia Questions Quiz


Questions and Answers
  • 1. 
    An oil Exploration & Production company is at risk to the price of oil going.
    • A. 

      Up

    • B. 

      Down

  • 2. 
    How would an oil exploration and production company hedge the above-mentioned risk?
    • A. 

      Buy futures or forwards

    • B. 

      Sell futures or forwards

  • 3. 
    An Interest Rate Swap is an obligation to Pay (receive) a fixed rate(set at inception) and Receive(pay) a floating rate (changes during life of swap) on predetermined dates in the future.
    • A. 

      True

    • B. 

      False

  • 4. 
    Which of the following statements best reflect the risk/reward profile of a SHORT CALL:
    • A. 

      Limited risk, Unlimited Reward

    • B. 

      Limited Risk, Limited Reward

    • C. 

      Unlimited Risk, Unlimited Reward

    • D. 

      Unimited Risk, Limited Reward

  • 5. 
    A speculator thinks long term interest rates will go lower for the next 2 years.  Which of the following trade most closely fits this outlook?
    • A. 

      Buy stock in a technology company with a product coming to market in two years

    • B. 

      Enter into a swap to RECEIVE fixed and PAY LIBOR for 2 years

    • C. 

      Buy shortest dated Gold Futures

    • D. 

      Sell shortest dated Eurodollar futures

  • 6. 
    One of the primary goals of derivatives reform regulation is to increase transparency and mitigate the risk between banks and prevent systemic risk by using Central Clearing (CCPs).
    • A. 

      True

    • B. 

      False

  • 7. 
    Which of the following statements best describes LEVERAGE:
    • A. 

      Posting initial margin of $10,000 on a contract worth $100,000

    • B. 

      Paying $100,000 for an asset worth $100,000

    • C. 

      Buying a bond and holding it to maturity

    • D. 

      Lending a company $1 million hoping to be repaid in 5 years

  • 8. 
    A bank adjusts the fixed rate of an interest rate swap to cover the bank's counterparty credit risk in case the client defaults or fails to make timely payments.  This adjustment is called CVA: Credit Valuation Adjustment
    • A. 

      True

    • B. 

      False

  • 9. 
    Under The Dodd Frank Act of 2010, most swap participants have to submit their trades to a clearinghouse and 
    • A. 

      Post Initial Margin (also called Independent Amount)

    • B. 

      Hire a Good Lawyer

    • C. 

      Pay Lossesor Receive Profits dailyd

    • D. 

      A & C

    • E. 

      A & B

  • 10. 
    Which of the following statement most closely defines liquidity risk?
    • A. 

      A trader owns bonds and has to sell them slowly so as not to tip his hand in the market

    • B. 

      A trader owns bonds and cannot find a bid to sell the bonds

    • C. 

      A trader owns bonds and has hedged them using a swap

    • D. 

      A trader owns U;.S, Government Bonds. The bid on the screen is $100 for $500 million

  • 11. 
    Corporations are exempt from submitting Interest Rate Swap contracts to a Central Clearing Counterparty CCP.  Instead they will enter into a swap with one or more dealers.  This type of swap is referred to as a:
    • A. 

      A corporate swap

    • B. 

      A currency swap

    • C. 

      A bilateral swap

    • D. 

      None of the above

  • 12. 
    Under the Dodd Frank Act of 2010 an interest Rate Swap that is NOT submitted to a clearinghouse
    • A. 

      Must Post Initial Margin

    • B. 

      Must Pay Losses or Receive Profits Daily

    • C. 

      Must have an ISDA Master Agreement & Annexes

    • D. 

      All of the above

    • E. 

      None of the above

  • 13. 
    All Swap dealers must execute their swaps using a Swap Execution Facility (SEF)
    • A. 

      True

    • B. 

      False

  • 14. 
    A swaps desk is fully hedged at the end of a trading day.  The next day the P&L shows a loss of $20 million.  While the middle office checks on any operational errors, the trader sees one of the larger counterparty announced bad news which widened out their CDS spreads.  This risk is referred to as
    • A. 

      Someone else's fault

    • B. 

      Credit Risk

    • C. 

      Liquidity Risk

    • D. 

      MNOP Risk

    • E. 

      None of the Above

  • 15. 
    How can a swap desk mitigate Counterparty Credit Risk?
    • A. 

      Charge all swap clients the appropriate CVA spread

    • B. 

      The risk is just a part of the business and cannot be hedged

    • C. 

      The trading desk should increase their risk limit

    • D. 

      The desk to cease trading with the counterparty

  • 16. 
    Which of the following terms best describes the term "Haircut" as it relates to collateral posting? HINT: haircut acts as a cushion so client doesn't have ot post new collateral every trading day.  
    • A. 

      If a security has a 5% haircut, $100 million in securities equals $105 million collateral posting

    • B. 

      If a security has a 5% haircut, $100 million in securities equals $5 million collateral posting

    • C. 

      If a security has a 5% haircut, $100 million in securities equals $95 million collateral posting

    • D. 

      None of the above

  • 17. 
    Which of the following best describes the risk of a single swap at inception?
    • A. 

      A swap has very little risk but will reach a peak approximately halfway through life of swap

    • B. 

      A swap has the greatest risk at inception

    • C. 

      Where the greatest risk is depends on the counterparty

    • D. 

      A swaps risk stays constant throughout the life of the swap

  • 18. 
    Economic Capital is the capital used to post collateral and carry positions of the bank.
    • A. 

      True

    • B. 

      False

  • 19. 
    A client enters a swap to pay FIXED @ 2.50% and receive 3MONTH LIBOR for 5 years.  This swap will make money as rates go:
    • A. 

      Up

    • B. 

      Down

    • C. 

      Sideways

    • D. 

      None of the above