<<12345678910111213141516171819202122232425>> 1. For ensuring effective risk control, RBI expects banks to facilitate functional segregation betweenTheir Head office branchesTreasury and Head officeFront office and IT departmentFront office, Mid office and back officeQuestion 1 of 25 2. The most important and well pronounced risk in treasury isCredit riskLiquidity riskMarket riskEmbedded option riskQuestion 2 of 25 3. The following limits in treasury are meant for controlling market riskCounter party interbank exposure limitsSettlement and pre-settlement limitsIntra-day, overnight open position limit and stop loss limitsOverseas borrowing limit prescribed by RBIQuestion 3 of 25 4. Value at risk (VaR) is a statistical measure to captureActual loss in portfolioProbable loss in a portfolio within a time horizon at a given confidence levelLoss or profit in a trading activityOperational risk in treasuryQuestion 4 of 25 5. Yield and price of a bond moveIn inverse proportionIn direct proportionIn unrelated fashionAs determined by bond issuerQuestion 5 of 25 6. What is the main challenge associated with liquidity risk in treasury operations?Managing cash flow mismatchesBorrowing funds in the market at short noticeSecuring adequate funding for long-term investmentsBalancing exposure to systematic and unsystematic risksQuestion 6 of 25 7. How are treasury risks primarily managed?Through reactive measures after losses occurBy increasing leverage to amplify profitsUsing conventional control and supervisory measuresBy eliminating exposure to market fluctuationsQuestion 7 of 25 8. Which office in the treasury is responsible for executing deals with counter-party banks?Front officeBack officeMid officeOperations officeQuestion 8 of 25 9. What is the primary responsibility of the back office in the treasury?Risk management and management information systemExecuting deals with counter-party banksConfirmation, accounting, and settlement of dealsMonitoring compliance with risk limits set in policiesQuestion 9 of 25 10. What is the role of the mid-office in the treasury?Executing deals with clientsSettlement of dealsRisk management and compliance monitoringVerification of market ratesQuestion 10 of 25 11. Why is it important to segregate front office and back office functions in the treasury?To enhance efficiency in deal executionTo ensure compliance with regulatory requirementsTo prevent conflicts of interest and maintain independenceTo streamline communication between different departmentsQuestion 11 of 25 12. What are the primary types of trading limits imposed on dealers in the treasury?Risk limits and liquidity limitsPosition limits and stop-loss limitsCredit limits and settlement limitsFunding limits and market limitsQuestion 12 of 25 13. What is the purpose of position limits in foreign exchange trading?To control the duration of the transactionsTo prevent conflicts of interestTo limit potential losses on dealsTo ensure compliance with regulatory requirementsQuestion 13 of 25 14. How are position limits prescribed for aggregate positions in the treasury?They are expressed in absolute amounts in RupeesThey are determined based on the bank's net worthThey are set according to the market reputation of counterpartiesThey are pre-approved by the Reserve Bank of IndiaQuestion 14 of 25 15. What is the purpose of stop-loss limits in trading operations?To prevent dealers from waiting indefinitelyTo ensure maximum profit on tradesTo allow for unlimited losses in adverse market conditionsTo provide additional funding for trading positionsQuestion 15 of 25 16. Why are exposure limits imposed on counterparties in treasury operations?To minimize trading risksTo protect against credit and settlement riskTo increase the bank's net worthTo facilitate larger trading volumesQuestion 16 of 25 17. What is market risk also known as, according to the Bank for International Settlements (BIS)?Credit riskPrice riskOperational riskLiquidity riskQuestion 17 of 25 18. What are the three main components of market risk?Credit risk, liquidity risk, and operational riskCredit risk, interest rate risk, and currency riskLiquidity risk, interest rate risk, and currency riskLiquidity risk, credit risk, and operational riskQuestion 18 of 25 19. How is liquidity risk described treasury risk management?The risk of losing funds invested together with interest due to counterparty failureThe risk of market fluctuations affecting asset valuesThe risk of cash flow gaps that cannot be bridgedThe risk of interest rate movements affecting interest earningsQuestion 19 of 25 20. What does interest rate risk refer to?The risk of currency depreciation affecting asset valuesThe risk of market fluctuations affecting liquidityThe risk of interest cost rise or interest earnings fall due to market movementsThe risk of default by counterparties in financial transactionsQuestion 20 of 25 21. How is currency risk related to interest rate risk?Currency risk is influenced by similar factors as interest rate riskCurrency risk is independent of interest rate riskCurrency risk and interest rate risk have no relationshipCurrency risk is not considered a component of market riskQuestion 21 of 25 22. What are derivatives primarily used for in risk management?SpeculationProtecting treasury transactions from market riskGenerating additional income for the bankIncreasing liquidity in the marketQuestion 22 of 25 23. How can derivatives help in managing balance sheet risk?By increasing exposure to market fluctuationsBy reducing the need for asset-liability managementBy allowing for speculation on interest rate changesBy hedging against changes in interest rates, exchange rates, etc.Question 23 of 25 24. What is an example of using derivatives to manage interest rate risk?Swapping fixed-rate interest for floating rate interestSwapping floating rate interest for fixed-rate interestEntering into a forward rate contract for commoditiesPurchasing options contracts on equity securitiesQuestion 24 of 25 25. How can derivatives be used to manage exchange rate risk?By increasing exposure to foreign currenciesBy avoiding entering into forward rate contractsBy entering into forward rate contracts or option contractsBy speculating on interest rate changes in foreign marketsQuestion 25 of 25 Loading...
