Which of the following methods is a means of credit risk mitigation?

[answerhappygod]

Which of the following methods is a means of credit risk mitigation?
A. entering into a plain vanilla IRS
B. entering into collateral agreements
C. hedging a portfolio’s USD exposure
D. investing only in sizeable and liquid markets

Answer : B



What are the primary reasons for taking an initial margin in a classic repo?
A. Counterparty risk and operational risk
B. Counterparty risk and legal risk
C. Collateral illiquidity and counterparty risk
D. Collateral illiquidity and legal risk

Answer : C



What type of institution is the typical drawer of banker’s acceptances?
A. Credit institution
B. Investment bank
C. Corporate
D. Central Bank

Answer : A



You have quoted spot USD/CHF at 0.9423-26. Your customer says I take 5. What does he mean?
A. He buys CHF 5,000,000.00 at 0.9423
B. He buys CHF 5,000,000.00 at 0.9426
C. He buys USD 5,000,000.00 at 0.9423
D. He buys USD 5,000,000.00 at 0.9426

Answer : D


Are the forward points significantly affected by changes in the spot rate?

A. Never -
B. For very large movements and longer terms

C. Always -
D. Spot is the principal influence


Answer : B Topic 2, Volume B