QUESTION: 57 Topic: 1, Volume A

Which statement about modern matched-maturity transfer pricing in banks is correct?

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.

Answer(s): D

QUESTION: 58 Topic: 1, Volume A

Supervisors would generally consider interest rate risk exposure in the banking book excessive beginning at what level of losses given a +1- 200 bps market rate movement?

> 2% of 6 months forward earnings
> 20% of regulatory capital
<10% of regulatory capital
< 5% of 12 months forward earnings

Answer(s): B

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QUESTION: 59 Topic: 1, Volume A

Which one of the following statements is incorrect? Hedge accounting of an existing position no longer applies when:

the trader acquires additional exposure in the hedged item.
the hedging instrument is sold, terminated or exercised.
the hedged item is sold or settled.
a hedge fails the effectiveness test.

Answer(s): A

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QUESTION: 60 Topic: 1, Volume A

Which of the following is a function of asset and liability management (ALM)?

coordinated limit management of a financial institution’s credit portfolio
running a matched trading book
monitoring credit quality of assets and establishing a early warning system
managing the financial risk of the bank by protecting it from the adverse effects of changing interest rates

Answer(s): B

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QUESTION: 57 Topic: 1, Volume A

QUESTION: 58 Topic: 1, Volume A

QUESTION: 59 Topic: 1, Volume A

QUESTION: 60 Topic: 1, Volume A

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