Derivatives Level 3 (IOC) – Quiz 02

Last Updated: June 2024

Table of Contents

CISI – Derivatives Level 3 (IOC) Quiz 02 is completed –
know the uses and requirements of inter-bank deposits: • what are inter-bank deposits • why do they exist • determination of inter-bank offer rates • reference rates
know the basic characteristics of Certificates of Deposit and Commercial Paper: • term • how and when issued • issued / redemption
understand the risk implications of trading in the money market contracts: • as a depositor • as a source of funding
understand the nature of the spot market and the trading and settlement of spot transactions: • purpose of the market • what is the spot market • contract value dates • settlement periods and timescales
understand the nature, characteristics, markets and uses of currency forward contracts: • what is a currency forward contract including non-deliverable forwards • commercial, speculative and hedging
understand the factors that determine forward rates and how forward rates are quoted: • effect of interest rate differentials • the relationship between the spot market and the forward market • what are forward points • how prices are quoted (may be tested by the use of simple calculations)
be able to calculate forward foreign exchange rates using interest rate differentials
understand the reasons for the government issuing bonds • public sector finance requirements • finance long term debt • role of national debt in government finances
understand the different categories of gilts and their special features such as (short, medium and long dated / undated / index linked / coupons and strippable)
know the main overseas government bonds and their main features (T bonds / JGBs / Bunds / OATs): • settlement • coupon • maturities • countries • spreads between different government bonds

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