Online Access Free 8004 Practice Test

What was the main risk scenario on the Metallgesellschaft trading strategy?

• A.The short-term price of the underlying being higher than the long-run contract
• B.The final price of the underlying being higher than the initial price
• C.Realized losses on short-term contracts against unrealized gains on the long-run contract
• D.The initial price of the underlying being higher than the final price

According to the Group of 30 Report, dealers and end-users are encouraged to:

• A.Use a common trading agreement for interest rate and equity derivatives but a separate agreement for foreign exchange transactions.
• B.Use a single master trading agreement as widely as possible with each counter party.
• C.Use separate trading agreements for interest rate derivatives, equity derivatives and foreign exchange transactions.
• D.Use one trading agreement for foreign exchange forwards and another for foreign exchange options.

The "normal" credit loss profile of Washington Mutual was increased by which of the following?

• A.Acquisitions like Long Beach and Providian
• B.Catastrophic losses in its own credit card division
• C.The general downturn in the economy of the US
• D.By lowering its own credit underwriting standards

Select the one correct statement relative to Barings Bank.

• A.Proprietary and agency trading were combined and therefore did increase risk.
• B.Proprietary and agency trading were combined and therefore did not increase risk.
• C.Proprietary and agency trading were separate and did increase risk.
• D.Proprietary and agency trading were separate and therefore did not increase risk.

According to the Group of 30 Report, important risks associated with dynamic hedging are:

• A.Greater volatility than expected over the life of an option
• B.Both A and B
• C.Neither A nor B
• D.Sudden gaps in market prices