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QUESTION: 366 Topic: 4, Volume D

You are the fixed-rate payer in a plain vanilla interest rate swap. If your counterparty defaults, your exposure at default is:

greater, the higher the market swap rate and the shorter the term
lower, the lower the market swap rate and the shorter the term
lower, the lower the market swap rate and the longer the term
greater, the higher the market swap rate and the longer the term

Answer(s): D

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QUESTION: 367 Topic: 4, Volume D

Extended trading hours and off-premises dealing can involve additional hazards, the avoidance of which requires clear controls. The Model Code prescribes best market practice. Which of thefollowing is true?

Off-premises dealing should be strictly prohibited.
After-hours trading should be prohibited.
Deals transacted after normal business hours or off-premises should only be undertaken on mobile phones approved by management.
Deals transacted after normal business hours or off-premises either by mobile phones or any other equipment should only be undertaken with the approval of management.

Answer(s): D

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QUESTION: 368 Topic: 4, Volume D

What should be done when a voice broker calls “off” at the very instant the dealer hits the broker’s price as “mine” or “yours”?

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.

Answer(s): C

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QUESTION: 369 Topic: 4, Volume D

Where there are shared management responsibilities or where an investment or shareholding exists in a broker by a counterparty:

the broker is not obligated to reveal any material connections provided Chinese Walls are in place.
the broker is not required to reveal any connections at all.
the broker is legally obliged to advise his clients of any material connections that exist.
is a matter which is not covered by the Model Code.

Answer(s): C

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