Capital market - Chapter 21 - B02E - Group 01 & 14

Multiple Choice

Which of the following statements about swap contracts is true?

• Both meet current payment needs and meet payment needs and hedge foreign exchange risks in the future

• Both meet the current payment needs and meet the needs of foreign exchange hedging in the future

• Both meet the current demand for payment and hedging of foreign exchange risks and meet the needs of hedging foreign exchange risks in the future

• Both meet the current payment and risk prevention needs and meet the needs of future payments

Multiple Choice

What is a swap contract ?

• What is a swap contract

• Is an agreement between two parties, in which the parties agree and commit to each other on the payment of a periodic material benefit to each other

• Is a document expressing the agreement between the parties on the purchase, sale or provision of services and goods

• Is an agreement between the employee and the employer

Multiple Choice

Features of swap contracts

• the contents of the swap contract must include the contents of the rights and obligations of the parties to the contract

• Swap contracts are executed on the principle of clearing, which limits credit risks by reducing the volume of currency payments between the two parties to the contract

• The parties to the commercial swap contract know each other well before deciding to sign the contract because the parties to the contract can only trade on the centralized market

• All are correct

Multiple Select

How many types of swaps are there ?

• 5 types

• 3 types

• 4 types

• 2 types

Multiple Choice

What is interest rate swap?

• Is a derivative contract whereby one party exchanges interest flows for another party's cash flows

• Is a foreign currency exchange contract whereby two parties will exchange the principal and fixed interest of a loan

• Is a credit derivative contract whereby the buyer will pay a recurring amount to the seller

• An agreement whereby the floating price of a commodity is exchanged for a fixed price for a specified period of time

Multiple Choice

What is credit swap ?

• An agreement whereby the floating price of a commodity is exchanged for a fixed price for a specified period of time

• Is a credit derivative contract whereby the buyer will pay a recurring amount to the seller

• Is a derivative contract whereby one party exchanges interest flows for another party's cash flows

• Is a foreign currency exchange contract whereby two parties will exchange the principal and fixed interest of a loan

Multiple Choice

What is currency swap?

• Is a credit derivative contract whereby the buyer will pay a recurring amount to the seller

• An agreement whereby the floating price of a commodity is exchanged for a fixed price for a specified period of time

• Is a derivative contract whereby one party exchanges interest flows for another party's cash flows

• Is a foreign currency exchange contract whereby two parties will exchange the principal and fixed interest of a loan

Multiple Choice

Which of the following is not true about forex forwards and currency futures?

• Deliveries are rare for futures while this is always done in futures

• The size of forward contracts can be arbitrary while the size of futures contracts is standardized

• The price of the futures contract is quoted in two directions of buying and selling, while the price of the futures contract is based on a fake mark opened at the exchange

• The parties of a futures contract do not know each other while the parties of a forward contract do know each other

Multiple Choice

In the direct interbank foreign exchange market, commercial banks

• 1-way fake, 1-way quote

• Create 1 way price, 2 way quote

• Fake 2-way, 1-way quote

• Create a 2-way pseudo-dummy, 2-way calculus

Multiple Choice

Why did the acbitrage business appear?

• Because the futures rate is different from the spot rate

• Because the difference between the buying rate and the selling rate is too big

• Because the difference between the buying rate and the selling rate is too small

• Due to the difference in cross rates between markets

Multiple Choice

What is credit risk?

• Is the possibility of loss when the customer does not repay the debt

• Is the possibility of loss when the customer does not pay the debt in full

• Is the possibility that an obligor will not meet a future financial commitment to a Lender

• The possibility of loss when the bank is unable to meet its financial obligations

Multiple Choice

Credit risk includes

• Portfolio and business risk

• Transaction risks and guarantees

• Trading and portfolio risks

• Option, trading and portfolio risk

Multiple Choice

When does a credit risk swap transfer credit risk from the policyholder to the insurer?

• Recurring premium debt

• Periodic premium payment

• Non payment

• All answers are correct

Multiple Choice

In the years following the gfc, how much has the nominal value of cds traded on the australian swap market decreased ?

• Almost 50%

• 10%

• 100%

• No decrease

Multiple Choice

The parties to the swap face the risk that one of the parties will default on payment when due. What risk does this create?

• Portfolio and business risk

• Interest rate risk

• Strategic risk

• Credit risk and payment risk

Multiple Choice

With an intermediate interest rate swap, the intermediary is faced with

• Credit risk of companies on each side of a matching swap

• A company's credit risk in a matching swap

• Payment risk of each company party

• A company's liquidity risk

Multiple Choice

If a company fails to pay interest, what will the bank do ?

• The bank does not pay interest to the company on the other side of the swap

• The bank pays interest to both companies of the swap

• The bank still has to pay interest to the company on the other side of the swap

• The bank does not pay interest to both companies of the swap

Multiple Choice

What is swap contract ?

• Transactions between banks and customers

• Transactions with maturities from more than 0 to 6 months

• A transaction between two commercial banks that exchange foreign currency for each other, after a period of time exchanging it at a different pre-determined rate

• A double transaction of buying and selling for a term, similar to lending to each other for a period of time

Multiple Choice

What is cross rate ?

• The exchange rate between two currencies is calculated through a “basket” of many strong currencies

• The exchange rate between two currencies is calculated through the third currency

• The exchange rate is not calculated in a straight line but diagonally

• The exchange rate is not calculated directly, but indirectly

Multiple Choice

What are the benefits of bank swap?

• Both banks can sell (or buy) the foreign currency they need

• Both banks make profits

• Both banks are independent of credit risk, do not affect balance and ability to borrow and repay

• Both banks treat each other as loan-free and earn the same profit