Bl Explanation Theory

Mid Term Exam MIF 642 Sunday, Oct 25, 2009 VERSION B

Instruction: You have 3 hours to finish this exam. It will require the usage of calculator. You can use notes from class and computer to aid your understanding in answering these questions. Books from class will not be needed nor allowed. Each question will be graded equally on a system of 1 point. There are a total of 54 questions. Please return this exam material to the proctor(s) who will administer and monitor the exam. Good luck!

1. Do central banks intervene in a floating currency system?

No.

2. Within which department/division of the firm does the risk taking activities take place?

Trading & Funding / Sales & Trading

3. Are hedge funds considered a player in the financial industry? Explain.

YES. Money invested in hedge funds are expected to generate large returns for investors.

4. What is the difference between the deal date and settlement date in a spot foreign exchange deal?

Transaction date and delivery date. Usually 2 days.

5. Can you trade foreign exchange (i.e, USDJPY, USDTHB, etc) on an organized exchange?

NO. Its over the counter only.

6. Do the brokers take risk when dealing in foreign exchange against banks? Explain.

No. They broker. They do not take risk.

7. What is the role of a market marker versus a market taker?

Market marker makes 2 ways prices. Market taker can decide on those 2 ways prices.

8. What are the 4 main characteristics of a foreign exchange transaction?

Done at agreed price

Done at agreed delivery date

Done at agreed quantity

Conversion of agree currency for another.

9. Define term currency.

Non reference currency that determines the price of a base currency

10. Is JPY quoted as a base currency against USD?

No.

11. If you are long USDJPY, does that mean you have a bearish view on the JPY?

YES.

12. What is the...