Asset Class Fx

8/11/2019 Asset Class Fx

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1. Aleksander Zub:

1. Trading strategies in active currency management include:a) Valuationb) Buying overvalued currienciesc) Selling currencies yielding low ratesd) Buying currencies yielding low ratese) Buying curriencies with positive performence

2. Currencies included in S&P Currency Arbitrage Indexa) Australian Dollarb) Euroc) South Africa Randd) Swedish Kronae) Danish Krone

3. In short term, main influence on exchange rates have:a) economic performanceb) longterm political situationc) daily central bank decisionsd) yearly trendse) tourist going abroad and buying currency

4. Indirect quotations takes the form of:a) Fixed amounts of domestic currency against varying amounts of foreign currencyb) Varying amounts of domestic currency against varying amounts of foreign currencyc) Varying amounts of domestic currency against fixed amounts of foreign currency. The

domestic currency is the base currencyd) Varying amounts of domestic currency against fixed amounts of foreign currency.The foreign currency is the base currency

5. PIP isa) Price Investment Perspectiveb) Price Interest Pressurec)Price Interest Pointd) Price Interest Percentage

6. Correct currency listing are:a) USD/AUD

b)EUR/GBPc)GBP/USDd) JPY/GBP

7. Long term movements in the fx market generally dont correlate with economic cyclesTRUE/FALSE

8. The rising price of gold creates buying pressure for the Canadian dollar


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TRUE/FALSE

9. Generally trading currencies is useful only for purposes connected with trade in goods andservicesTRUE/FALSE

10.Create the cross-rate EUR/CHF if

Spot EUR/GPB: 0,7374/0,7379Spot GPB/CHF: 2.1702/2,1707

BID: 0,7374 * 2.1702 = 1.6003

ASK: 0,7379 * 2,1707 = 1.6018

Answer: 1.6003/1.6018

2. Kasia Sajdok

1.Currency pairs have a tendency to form strong persistent trends. TRUE

2.When a lower-rate currency fall in value relative to the higher one, return on carry trade can

be diminished FALSE

3. The Balassa-Samuelson effect told that average prices is cheaper in poor countries than in

rich ones. TRUE

4. For which strategies this statemen is true: managers buy currencies yielding high rates

while selling those yielding low rates

a) carryb) momentum

c) valuation

d) PPP

5. The essence of momentum strategies is that this strategies:

a) profit when currencies trend

b) is useful only on domestic market

c) is working in short time horizon

d) cover the time horizon over which fundamental models having little forecasting power

6. The law of one price states that:

a) identical goods will have the same price in different market

b) the price is expressed in terms of one currency


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c) different goods will have the same price in different market when the price is expressed in

terms of two currency

d) identical goods will have the same price in different market when the price is expressed in

terms of two currency

7. The current account balance summarizes the flows of:a) goods, services, transfer payments

b) income, taxes,

c) income

d) all above are correct

8. Difference between the lower rate at which the foreign currency can be sold and the higher

rate at which it can by bought is:

a) bid-offer spread

b) offer-ask spread

c) bid-ask spread

d) sell-buy spread

9. The PIP is :

a) the maximum price movement in a given currency pair

b) the minimum price movement in a given currency pair

c) price interest point

d) price in purchase

10. Calculate the SGD/CHF cross-rate:

USD/CHF 1.3013/1.3109USD/ SGD 1.1419/1.1444

Bid rate=1.1419/1.3109=0.8710 SGD/CHF

Offer rate = 1.1444/1.3013 = 0.8784 SGD/CHF

Spot SGD/CHF is 0.8710/84

3. Beata Grucel

1. The difference between the lower rate at which the foreign currency can be sold and thehigher rate at which it can be bought is:a) bid-ask straddle

b) bid-ask spreadc) PIPd) none of the above

2. PIP is:a) the maximum price movement in a given currency pair.b) the price at which a base currency is offered for salec) the minimum price movement in a given currency pair.d) none of the above


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3. Possible positions in trading:a) longb) shortc) flatd) none of the above

4. Foreign exchange swap can be used to:a) to switch a deal from one currency to another, and back again, on a hedged basisb) to exchange interest rate cash floks from floating rate to fixed ratec) to move a given currency deal forward or backward in timed) none of the above

5. Currency option is:a) contract that obligates the owner to buy or sell a currency specified exchange rate during aspecified period.b) debt security, in which the authorized issuer owes the holders a debt and is obliged to payinterest to repay the principal at a later date, termed maturity.

c) contract that gives the right to buy or sell a currency with another currency at aspecified exchange rate during a specified period.d) none of the above

6. Reporting dealers are:a) financial institutions that actively participate in local and global foreign exchange andderivatives markets.b) mainly large commercial and investment banks and securities houses.c) non-financial end users, such as corporationsd) none of the above

7. The current account balance summarizes the flow of goods, services, income and transfer

payments into and out of the country.TRUE/FALSE

8. The most undervalued currency is represented by the highest valuation.TRUE/FALSE

9. The law of one price, states that identical goods will have the same price in different marketswhen the prices are expressed in terms of one currency.TRUE/FALSE

10. What is the quotation of a 6-months (184 days) outright USD/CHF if:

USD/CHF 1,5000/10 -> 1,50001,50106M USD (184 days) 5 7/8 - 6 % -> 0,058750,060006M CHF (184 days) 2 - 2 1/8 % -> 0,020000,02125

Obid = 1,5000 x (1 + 0,02 x 184/360) / (1 + 0,06 x 184/360) = 1,4702Ooffer = 1,5010 x (1 + 0,02125 x 184/360) / (1+ 0,05875 x 184/360) = 1,4731

6-month USD/CHF is: 1,4702/1,4731


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4. Jakub Gorczyski

1. According to the law of one price, when the prices are expressed in terms of one currency:a) identical goods will have the same price in different markets,b) identical goods will have different price in different markets,c) exchange rates will adjust so that the same goods costs the same in all countries,d) exchange rates will not adjust so that the same goods costs the same in all countries.

2. The Big Mac index suggests that most emerging-market currencies are:a) significantly undervalued,b) significantly overvalued,c) fairly priced,d) non of the above.

3. The Big Mac Index is published by:a) The Economist,b) The Wall Street Journal,c) The Washington Post,d) none of the above.

4. In which active currency management strategy managers buy undervalued currencies whileselling those that are overvalued?a) carry,b) momentum,c) valuation,

d) none of the above.

5. The major world currencies include:a) Euro,b) Swiss Franc,c) Polish Zloty,d) Australian Dollar,e) Russian Rouble.

6. What are the factors preventing closer convergence of international prices due to thepossibility of arbitrage in the goods market?a) tarrifs,b) transportation costs,c) trade restrictions,d) costs of labor.

7. According to the Big Mac Index, Big Mac in Switzerland is cheaper than Big Mac in India.a) True,b) False.


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8. The carry active currency management strategy typically has a high correlation to equitymarkets.a) True,b) False.

9. In currency option, the contract obliges us to buy or sell a currency with another currency at a

specified exchange rate during a specified period.a) True,b) False.

10. Create the cross-rate PLN/AUD ifEUR/PLN 4.2272/4.2303EUR/AUD 1.2811/1.2819

Bid rate:1.2811 (EUR/AUD) / 4.2303 (EUR/PLN) = 0.3028 (PLN/AUD)

Ask rate:

1.2818 (EUR/AUD) / 4.2273 (EUR/PLN) = 0.3032 (PLN/AUD)

Answer: 0.3028/0.3032

5. Pawe Dwornicki

1. What was the average daily foreign exchange instruments turnover around the world in2010? (in billions $)a) 1 000b) 500c) 3 900d) 4 800

2. What country is the worlds centre of foreign exchange with 1/3 share in total exchange?a) UKb) USAc) Germanyd) China

3. Foreign exchange swap is:a) a transaction which involves the actual change of two currencies on a specific date atthe rate agreed at the time of contracts conclusion, and the reverse exchange of thesame two currencies at the rate agreed further in the future.

b) contract that gives the right to buy or sell a currency with another currency at a

specified exchange rate during a specified period.c) exchange of the currencies, done by bank on a clients demand.d) none of the above.

4. What is the fractional PIP?a) first two digits after decimal point in exchange rate quote.


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b) fifth digit after decimal point in exchange rate quote.c) It means that there is no digits after decimal point.d) none of the above.

5. PPP strategy involves:

a) buying currencies that trade below its fundamental value.b) selling currencies that trade below its fundamental value.c) buying currencies that trade above its fundamental value.d) selling currencies that trade above its fundamental value.

6. Momentum strategy is:a) buying a currency with positive performance lately.b) selling a currency with a negative performance lately.c) buying and possessing a currency for no longer than one day.d) none of the above.

7. If the interest rate in UK is 2% and the interest rate in Poland is 3% then GBP is at a forwarddiscount to PLN. (GBP/PLN)TRUE /FALSE

8. Loonie is a nickname of Canadian Dollar.TRUE/FALSE

9. Tariffs could be a reason of international prices divergence.TRUE/FALSE

10. What is the outright forward rate for EUR/PLN for 1 month and which currency sellsat premium?

EUR/PLN Bid Offer

Spot rate 4.2275 4.2320

1 month 151 154

The outright forward rate is 4.24264.2474. Euro is being traded at a premium.

6. Agata Horbatowska

1. Direct quotation:a) takes the form of variable amounts of domestic currency against a

fixed amount of foreign currencyb) takes the form of fixed amounts of domestic currency against varying

amounts of foreign currencyc) the foreign currency is the base currencyd) the foreign currency isn`t the base currency


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2. PIP :a) Is the maximum price movement in a given currency pairb) Is the minimum price movement in a given currency pairc) For most currency pairs it is 4th digit after the decimal pointd) For most currency pairs it is 6th digit after the decimal point

3. DBCR (Deutsche Bank Currency Returns) Index :a) an equal-weighted blend of the most widely used investment strategiesamong active currency managersb) s is an excess return index and is published daily by DBc) is good representation of common active strategies used by professionals inthis fieldd)none of the above

4. Balassa-Samuelson effect:a) Rich countries are relatively more productive in traded goods sector

b)

The rise in productivity in traded goods sector cause the rise in wagesc) To match higher wages in the traded goods sector, non-traded goodsproducers must raise their prices

d) Therefore the richer countries overall price level must rise

5. A positive value (current account surplus):a) indicates that the flow of capital from these components into the

country exceeds the capital leaving the countryb) Its creating a net demand for the countrys currency, so will have the

effect of strengthening itc) the country requires more foreign currency than it receives through sales of

exports

d) The excess demand for foreign currency lowers the country's exchange rateuntil domestic goods and services are cheap enough for foreigners

6. How it is possible that goods market arbitrage does not force closer convergence ofinternational prices?

a) Tariffsb) transportation costc) costs of non-tradable inputsd) non-tariff barriers

7. Currency pairs have a tendency to form strong, persistent trends.

P/F

8. The Big Mac index suggests that most emerging-market currencies are significantlyundervalued.

P / F9. Forward foreign exchange rates are quoted as difference between spot and forward

rates


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P/F

10. Calculate the PLN/CHF cross-rates

USD/PLN 1.2393 -1.2403

USD/CHF 1.1377 -1.1387The bank would buy PLN from the customer in exchange for dollars at the offer rate fordollars and then exchange the dollars into CHF at the bid rate for dollars. This impliesthat the bid rate for PLN (offer rate for CHF) is:Bid rate = (1,1377 USD/CHF)/(1,2403 USD/PLN)=0,9172(USD/CHF*PLN/USD)=0,9172 PLN/CHFThe bank would buy CHF from the customer in exchange for dollars at the offer rate for

dollars and then exchange the dollars into PLN at the bid rate for dollars. This impliesthat the offer rate for PLN (bid rate rate for CHF) is:Offer rate = (1,1387 USD/CHF)/(1,2393 USD/PLN)=0,9188 PLN/CHF

Spot PLN/CHF is 0,9172/88

7. Laura Wykrt

1. Initially FX rates were expected to evolve in response to:a) the costs of similar goods in different countriesb) the unexpected changes in unemployment in different countriesc) the change according to relative interest rates in the different countriesd) the uncertain monetary policy in different countries

2. The main attributes in valuation - trading strategy are:

a) managers buy currencies yielding high ratesb) managers sell currencies yielding low rates

c) managers buy undervalued currenciesd) managers sell overvalued currenciese) this approach tends to work best in the short term

3. S&P Currency Arbitrage Indexa) seeks to model a valuation strategyb) takes a long position in currencies that have a higher interest rate than the USDc) takes a short position in currencies that have a higher interest rate than the USDd) takes a short position in currencies that have a lower interest rate than the USDe) takes a long position in currencies that have a lower interest rate than the USD

4. In practice, the PPP theory:

a) is usually expressed in terms of price levelsb) is not usually expressed in terms of price levelsc) is expressed in terms of changes in price levels in different countriesd) in terms of differential inflation ratese) the change in the exchange rate over a period will equal the differential inflation

rates between the two countries

5. Speaking of which currency pairs we use the term commodity currencies:a) USD/JPY


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b) USD/CADc) EUR/USDd) AUD/USDe) NZD/USD

6. Premium is added to the spot rate:

a) if the number on the bid side is lower than the number on the offer sideb) if the number on the bid side is larger than the number on the offer sidec) the currency is trading at the forward premiumd) the currency is trading at a forward discount

7. In S&P Currency Arbitrage Index the weight of each currency is directly proportional to itsvolatility and inversely proportional to its interest rate.TRUE/FALSE

8. A widely used measure for fundamental values in currency markets is the real exchange.TRUE/FALSE

9. Indirect quotationtakes the form of variable amounts of domestic currency against afixed amount of foreign currency.TRUE/FALSE

10. Create the cross-rate CHF/JPY:

Spot: GBP/CHF 2,1702/2,1707GBP/JPY 192,70/193,00

BID: 192,70/2,1707 = 88,77OFFER: 193,00/2,1702 = 88,93

CHF/JPY 88,77/88,93

8. Aleksandra Zajc

1. EMH assumes that market participants are homogeneous, risk-neutral and rational. TRUE

2. Carry Trade Strategies are used by hedge funds and other traders to take advantage ofinterest rate differentials. TRUE

3. Short term target rate of Canadian Central Bank is a base rate. FALSE

4. Target rate of Polish Central Bank is:

a) base interest rateb) overnight ratec) main refinancing rated) uncollateralized overnight call ratee) reference rate


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5. Into commodity currencies is included:a) Canadian dollarb) Swiss Francc) British Poundd) Australian dollar

6.Which position will benefit if the exchange rate fallsa) longb) shortc) flatd) long and short

e) none of above

7. Which country is the worlds largest foreign exchange centre:a) Switzerlandb) Japanc) USd) Spain

e) United Kingdom

8. In order to compute the outright rate, you needa) the spot rateb) the number of daysc) the interest rates for both currencies

d) none of above

9. Kiwi is a nickname of:a) Japanese Yenb) British Poundc) Canadian Dollar

d) Euroe) New Zealand Dollar

10.What is the rate for selling X against Y if:

Spot USD/X: 5,971020Spot USD/Y: 1,781722

1 USD5,9720 X1 USD1,7817 Y

5,9720*X=1,7817*Y

Y=3,3519*X

9. Adam Truszkowski

1. We compute dollar PPP by:a) Dividing the local currency price in each country by the dollar price,b) Exchanging the local currency into dollars,c) Comparing the exchange rate of local currency into dollars,d) All of the above.


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2. Trading flows are:a) Countrys current account balance,b) Exchange of goods and services,c) Currencies that are are traded for purposes other than trade in goods and services ,d) A synonym to hot stocks.

3. When did the NASDAQ experienced the largest year gain ever?a)1990,b)1994,c)1999,d)2002.

4. If commodities prices are rising, countries that produces these commodities could experiencea) Change in PPP,b) Increase of exchange rates,c) Decrease of exchange rates,d) Inflow of capital.

5. What does BIS stand for:

a) Bank for International Settlements ,b) Bank for Internal Settlements ,c) Bank for International Sales ,d) None of the above.

6. Ask prise is also known as:a) exchange,b) offer,c) ask rate,d) offer rate.

7. Rich countries are less productive in traded goods sector.P/F

8. If exchange rates fluctuate unfavorably carry trades can backfire.P/F

9. Currency investors have been using some form of trend-following strategies for decades.P/F

10. What is the rate of selling X against Y

SPOT EUR/X 4,4356 - 60SPOT EUR/Y 2,711215

1 EUR - 4,43601 EUR - 2,7112

4,4360X = 2,7112Y


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Y=1,6362

10. Martyna Kot

1. United Kingdom has its own central bank. TRUE

2. One of the theories useful for explaining long-term currency trend is the theory ofpurchasing power parity (PPP). TRUE

3. The Bank of Japan has been forced to keep rates virtually at zero for many yearsbecause of Japan's disinflationary economy. TRUE

4. Which strategys name can be found among three well known trading strategies inactive currency management:a) PPPb) Carry

c) Momentumd) None from above

5. Which statement related to carry trade is true:a) In a carry trade, traders sell currencies yielding low interest rates vs. currencies

with a higher interest rate.b) Investors typically execute this trade on a leveraged basis to gain the lowest returns

possible.c) This strategy typically has a low correlation to equity markets.d) None from above

6. What are assumptions of EMH:

a) Participants are homogenousb) Participants are riskneutralc) Participants are irrationald) None from above

7. Groups that do not try to maximize their foreign exchange profit when they trade in thecurrency market are:

a) Central banksb) Individual investorsc) Large corporations doing business abroad, trading in order to hedge their

positionsd) None from above

8. When was the market crisis?

a) 2003

b) 2004

c) 2005

d) 2008

9. Common carry trade often involved


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c) is not re-balanded at all

d) re-balanded on a quarter basis

6. Domestic currency is :

a) base currency in direct quotationb) base currency in indirect quotation

c) counter currency in indirect quotation

d) counter currency in direct quotation

7. The short term target rate calculated by Central Bank of China is called Base interestrate? - true

8. The Big Mac Index has nothing to do with a Low of One Price? False

9. Increase in the price of oil has negative effect on CAD? False

< zadanie >

Under assumption that:

EUR/USD: (BID) 1.3990, (ASK) 1.3992GBP/USD: (BID) 1.5868, (ASK) 1.5871

Compute EUR/GBP (ASK)

EUR/GBP(ASK)= EUR/USD(ASK) / GBP/USD(BID) = 1.3992 / 1.5868 = 0.8818

12. Natalia Rost1. Direct quotation takes the form of variable amounts of domestic currency againsta fixed amount of foreign currency. T2. For U.S. Central Bank (Federal Reserve) the target rate is called reference rate. F3. Commodity currencies are currencies from countries whose economic health

depends on natural resources export. T4.The ISO (International Organization for Standardization) determines:

a) the symbol for a currency;b) the order of currencies in each part;

c) the name of currencies;

d) the minimum price movement in a given currency pair;5. Spot transaction is :a) single outright transaction;b) at a rate agreed on the date of the contract for value;c) a transaction with delivery at some time in the future;d) a transaction with delivery within two buisness days;

6. In order to compute outright rate, you need:a) the interest rates for both currencies;


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b) the number of days;c) the spot rate;d) the number of premiums and discounts;

7. Currency option is a contract, which:a) gives the right to buy a currency with another currency;

b) gives the rigth to sell a currency with another currency;c) includes exotic currency options;d) includes average rate options and barrier options;

8. Other financial instruments:a) they are the most famous participants after reporting dealers;b) smaller banks, mutual funds and currency funds;

c) financial subsidiaries of corporate firms and central banks;d) financial institutions that actively participate in local and global foreign

exchange and derivatives markets.9. What are the factors of goods market arbitrage which does not force closerconvergence of international prices?

a) tariffs;b) transportation cost;c) costs of non-tradable inputsrents, labor, taxes, insurance;d) non-tariff barriersimport/export licenses, trade restrictions;

10. You have a customer who wishes to buy X and sell YSpot USD/Y: 1,7835-40Spot USD/X: 5,9710-20

Buy X=> sell USD (5,9710 bid)Sell Y => buy USD (1,7840 offer)

5,9710X=1,78404Y1Y=5,9710/1,7840X1Y=3,3470X

13. Anna Zawadzka

1.Trading strategies in active currency management are:a) carryb) momentum

c) valuationd) none of the above

2.Ask is:a) the price at which a base currency is offered for saleb) the price at which an investor can place an order to sell a base currency in exchange for thequote currency.c) none of the above


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3. 5th digit added by brokers to the end of the quote is called:a) fractional pipb) tickc) pointd) none of the above

4.Nickname of New Zealand dollar is:a) Swissyb) Aussiec) Loonied) Kiwi

5. Value of which currencies is heavily correlated to commodity prices:a) Canadian dollarb) US dollarc) New Zealand dollard) Australian dollar

e) all of the above

6. Flat position:a) benefits if the exchange rate risesb) benefits if the exchange rate falls:c) is absence of a long or short positiond) none of the above

7. The weight of each currency is directly proportional to its volatility and inversely proportional

to its interest rate. False

8.EMH assumes that market participants arent homogeneous, risk-neutral and rational.False

9. The Big Mac Index is as an informal way of measuring the purchasing power parity (PPP)between two currencies.True

10.What is the outright rate of USD/GBP for 2 months?

USD/GBP Bid Offer

Spot rate 1,6097 1,6102

2 months 194 190The outright forward rate is 1,59031,5917.

14. Magda Muskus

1. A spot foreign exchange deal is one made for settlement in 2 working days time. TRUE2. Generally a working day is defined as one which at least one bank is open for business in atleast one country. FALSE


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3.Indirect quotation takes the form of fixed amounts of domestic currency against varyingamounts of foreing curency. TRUE4.Foreign exchange instruments are:a) spot transactionsb) outright forwardsc) foreign exchange swaps

d) currency swapse) all above

5.A spot deal done Monday is settled:

a) Monday

b) Tuesday

c) Wednesday

d) Thursday

6. To compute outright rate we need:

a) nb of days

b) spot rate

c) interest rates

d) days basis

e) all above

7. Trading strategies are:

a) carry

b) momentum

c) risk aversion

d) valuation

8. Reporting dealers are:

a) large commercial and investment banks

b) securities houses

c) corporations

d) money market funds

9. Balassa-Samuelson effect is:

a) expectation that average prices are cheaper in poor countries than in rich ones

b) expectation that average prices are more expensive in poor countries than in rich ones

c) expectation that average prices are the same in poor and rich countries

10.You are money market Dealer and you are going to close your open position using the

quotation from the market. Find the amount of interest if the principal is P=15mio, the interest

rate i- MMquotation=2,45%-2,58%, and n=60 days to maturity. You are in short position.

Answer: 64500.

15. Gosia Tomnecka


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(Y/Pound)=145.09-150.72

8. Target rate of the U.S. Central Bank is the Official cash rate (F)

9. One of the theories useful for explaining long-term currency trend is the theory of

purchasing power parity (T)10. The Canadian dollarcoin's nicknameis Aussie (F)

16. Kasia Tomecka

1.The U.S.paper currency has many nicknames such as:a). Greenbackb). Looniec). Buck

d). Kiwi

2.Absence of a long or short position is:a). Short positionb). Long positionc). Flat position

d). Moderately long position

3. Method to the madnessa). JPY is usually listed as the second member of the pairb). AUD and NZD are always listed first

c). GBP is also listed firstd). None of the above

4. S&P Currency Arbitrage Indexa). Consists of positions of nine of the G8 currencies based on their relative interestrates versus the U.S. Dollar.b). Takes a long position in currencies that have a higher interest rate than theU.S. Dollarc). Takes a long position in currencies that have a lower interest rate than the U.S.

Dollar

d). The currencies included are the Australian Dollar, British Pound, Canadian

Dollar, Euro, Japanese Yen, New Zealand Dollar, Norwegian Krone, Swedish

Krona and the Swiss Franc.

5. The Big Mac index

a). suggests that most emerging-market currencies are significantly undervalued

b). is published by The Wall Street Journal


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c). compares the price of the popular hamburger, sold at McDonalds restaurants

in a variety of countries

d). is based on the theory of purchasing-power parity

6. Target rate of U.S. Central Bank is:

a). Overnight cash rateb). Bank ratec). Federal funds rate

d). Reference rate

7.Calculate the cross-rate (EUR/AUD) if:

1.2474- 1.2478 USD/EUR

0.7296- 0.7299 USD/AUD

BID: 0.7296/ 1.2478= 0.584709088

ASK: 0.7299/ 1.2474=0.585137085

(EUR/AUD)= 0.584709088- 0.585137085

8. Currencies are traded for purposes other than trade in goods and services (T)

9. The currency of Crna Gora and Kosovo is the Euro (T)

10. Singapore is the world's biggest foreign exchange centre (F)

17. MARTA MCIK

1. Currencies not included in S&P Currency Arbitrage Index:

a) PLN

b) EUR

c) JPY

d) USD

e) none of the above

2. PPP:

a) is used to make international GDP comparison

b) is used to assess fair value of each currency versus USD

c) gain in overall prices lead to reducing Purchasing Power Parity

d) none of the above

3. The Big Mac Index:

a) compares the price of the popular hamburger sold at Mc Donald's restaurants


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b) compares the price of all products sold in Walmart shops

c) compares the price of all services oferred by financial insitutions


4. Long position means:

a) a position that will benefit if the exchange rate falls

b) a position that will benefit if the exchange rate rises

c) absence of a long or short position


5. For computing the outright rate we need:

a) spot rate

b) the number of years

c) the interest rate for one of currencies


6. Mark correct answers:

a) interest rate base currency < interest rate quote currency -> discount

b) interest rate base currency < interest rate quote currency -> premium

c) interest rate base currency > interest rate quote currency -> discount

d) interest rate base currency > interest rate quote currency -> premium

7. The weight of each currency in S&P Currency Arbitrage Index is directly proportional to

its interest rate and inversely proportional to its volatility. TRUE

8. As we know carry, momentum and valuation are three well known trading strategies inactive currency management- the main attribute of carry is that managers sell currencies

yielding high rates while buying those yielding low rates. FALSE

9. DB Currency Valuation Index is re-balancing every year. FALSE

10. Calculate: PLN/100 JPY

EUR/JPY 103,27/103,34

EUR/PLN 4,2511/4,2536

Bid: 4,2511/103,34= 0,041137

Offer: 4,2536/103,27= 0,041189

Answer: PLN/ 100 JPY 4,1137/ 4,1189

18. PIOTR PASTERNY


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1.In the capital approach, we are searching for anything that has a strong enoughattraction to capital that it can create a flow of money out of the one country and intoanother.

TRUE/FALSE

2.Economists tend to use a diversified basket of goods rather than a single random itemto determine the value of a currency

TRUE/FALSE

3.While using PPP for explaining rate movements, it is safe to assume that all countriesuse the same basis for preparing price indices

TRUE/FALSE

4.Lowering and raising interest rates by central banks :a) causes capital to flow in and out of countriesb) makes some currencies stronger and some weakerc) has no influence over currenciesd) none of the above

5.Momentum managers typically base their decisions on :a) computer modelsb) technical analysisc) fundamental analysisd) none of the above

6.Mrs Watanabe phenomenon :a) involves shorting JPY in favor of a high-yielding currencyb) refers to young and active Japanese women trading in currency marketsc) is connected with currencies such as the New Zealand dollar and the Turkishlirad) none of the above

7. A deficit in the country's current account balance means that :a) the country requires more foreign currency than it receivesb) the country requires less foreign currency than it receivesc) There is excess demand for foreign currency that lowers the country'sexchange rated) None of the above

8.The notion of hot commodities describes a situation in whicha) Commodities prices are fallingb) Commodities prices are rising


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c) Countries which produce these commoditiesexperience an inflow of capitald) Buying pressure for the currencies of those countries arises

9. Examples of trend-following or momentum strategies approaches include :

a) simple currency returnsb) moving average cross-over rulesc) Markov switching modelsd) none of the above

10. Calculate cross rate EUR/CAD when :

USD/EUR = 0.7742 / 44USD/CAD = 1.0003 / 06

EUR/CAD = (1.0003/0.7744)/(1.0006/0.7742)

EUR/CAD = 1.2917/1.2924

19. ADAM SODZAWICZNY

1. A forward-forward swap is a swap deal between two forward dates. TRUE/FALSE

2. Currency option is a contract that gives:a) the right to buy or sell a currency with another currency at a specified

exchange rate during a specified periodb) the obligation to buy or sell a currency with another currency at a specified exchangerate during a specified periodc) the right only to buy or to sell a currency with another currency at a specifiedexchange rate during a specified periodd) b) the obligation only to buy or to sell a currency with another currency at a specifiedexchange rate during a specified period

3. The category of currency option includes all types of options excluding exoticcurrency options such as average rate options and barrier options. TRUE/FALSE

4. The Tom-next (T/N) foreign exchange swap means:a) A swap from today to the next dayb) A swap from tomorrow to the next dayc) A swap from then to the next dayd) non of the above

5. One of the fx swaps basic uses is to move a given currency deal forward orbackward


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in time TRUE/FALSE

6. In a foreign exchange swap a reverse exchange of the same two currencies has tooccur:a) compulsory at the next day

b) compulsory within the next two daysc) at a date further in the futured) compulsory within the next week

7. Mark the true sentences:a) if interest base currency is lower than interest rate quote currency then we deal witha discountb) if interest base currency is lower than interest rate quote currency then wedeal with a premiumc) if interest base currency is higher than interest rate quote currency then we deal witha premium

d) if interest base currency is higher than interest rate quote currency then wedeal with a discount

8. The symbol D in the outright rate equation stands for:a) the discount rateb) the duration of the exchange swapc) the number of daysd) the direct interest rate

9. The ISO abbreviation stands for:a) The International Organization for Standarization

b) The International Organization for Settlementsc) The International Organization for Statementsd) The International Organization for Foreign Swaps

10. Under assumption that:

PLN/USD: (BID) 3.2011, (ASK) 3.2123GBP/USD: (BID) 1.6118, (ASK) 1.6882

Compute PLN/GBP (ASK)

20. Kasia Kulawik

1. Valuation is one of well known trading strategies in active management which tends to workbest in the long term and uses fundamental economic factors to determine over andundervaluation. True

2. When a lower-rate currency rises in value relative to the higher one, or the higher-yieldingcurrency depreciates, return on the carry trade can be extended. False

3. Low risk aversion of investors favours on a carry trade. True


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4. Which of the followings refers to the S&P Currency Arbitrage Index?a. The S&P Currency Arbitrage Index consists of positions of nine of the G10

currencies based on their relative interest rates versus the U.S. Dollar.b. The index takes a long position in currencies that have a higher interest rate

than the U.S. Dollar and a short position in currencies that have a lowerinterest rate than the U.S. Dollar.

c. The weight of each currency is directly proportional to its interest rate andinversely proportional to its volatility.

d. The index seeks to model a momentum strategy.5. The advantages of using technical analysis on Forex Market are:

a. Currency pairs have a tendency to form strong, persistent trends.b.The repetition of the technical patterns is much more likely to occur on the chart

of a currency pair than on a stock chart.c. In the forex market trends tend to continue for months and even years.d. None of the above.

6. Fx valuation strategy assumes:a. Buying currencies considered to trade below a fundamental value and selling

currencies which trade above a fundamental value.

b. A widely used measure for fundamental values in currency markets is the realexchange.

c. Fundamentals tend to work for currencies in the short-to medium-termd. Fundamentals tend to work for currencies in long-term.e. All the above are true.

7. According to Balassa-Samuelson effect:a. The rise in productivity in traded goods sector cause the rise in wagesb. Poor countries are relatively more productive in traded goods sectorc. To match higher wages in the traded goods sector, non-traded goods producers must

lower their pricesd. Therefore the richer countries overall price level must rise.

8. Goods market arbitrage does not force closer convergence of international prices because of:

a. Tariffsb. Transportation costc. Cost of non-tradable inputsd. Non-tariff barriers

9. When using PPP at the basis for explaining rate movements, there are a number ofconsiderations that must be borne in mind. These are:

a. Where a price increase results in a commensurate fall in sales,b. Price indices are prepared on the same basis in each country,c. Most countries use only one index,d.The only prices that should affect exchange rates are those that relate to goods

and services that can be traded internationally.10. The entrepreneur wants to sell 135 000 USD for euro. How many euros will he receive if bank

quotations are as follows:EUR / USD = 1.6434 / 1.6495

135 000/1.6495=81 842,98

Bank will sell 1 EUR for 1.6495 $, hence the entrepreneur for 135 000$ will get 81 842,98 EUR.

21. Jacek Gajowski


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1. The outright forward transactions:

a. involve the exchange of two currencies at a rate agreed on the date of thecontract for value or delivery at some time in the future

b. with FX swaps have the greatest share over 55 % in overall foreignexchange market of all transactions

c. are executed within two business daysd. are executed more than two business days later

2. The hot market phenomenon in 1999:a. Refered to the biggest tech stocks listed on the NASDAQ marketb. Caused a great increase of US dollarc. Experienced the largest gain for FTSE 100 indexd. Encouraged many investors to participate in world tech rally

3. The Forex Market trends:a. are correlated with economy cycles in long periodb. change fast all the timec. are analyzed with technical strategies for decadesd. are the result of the changes of an individual company

4. When a bank quotes the exchange rate as (EUR/PLN) 4.2415/48it means that:a. The bank will buy PLN at 4.2448b. The bank will sell 4.2448 of PLN in exchange for 1 of EURc. The bank will sell 4.2448 of EUR in exchange for 1 of PLNd. The bank will sell 4.2415 of PLN in exchange for 1 of EUR

5. The International Organization for Standardization (ISO) determines:a. That each currency has to have its own symbolb. That all of currencies have four letters codesc. The official order of currencies in each paird. None of above

6. When a currency trader takes a short position:a. He will benefit if the exchange rate falls

b. He will benefit if the exchange rate risesc. He will miss when the exchange rate fallsd. He will miss when the exchange rate rises

7. During times of big volatility on the markets investors stay on their positions with high-yieldingcurrencies and apart from that they buy the another ones. ( TRUE/FALSE)

8. According to the S&P Currency Arbitrage Index the weight of each currency is directlyproportional to its interest rate and inversely proportional to its volatility. (TRUE/FALSE)

9. Spot transactions have the greatest contribution in the instruments used in the FX market.(TRUE/FALSE)

10. Calculate cross rate USD/CAD when you have:GBP/USD1.6066/1.6071GBP/CAD1.6064/1.6073

Bid for USD/CAD is: 1.6066/1.6073=0.9996Ask for USD/CAD is: 1.6071/1.6064=1.0004USD/CAD0.9996/1.0004

22. MAREK SZCZEPKA

1. Carry trade is effective when:


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a) investors are optimistic and market is going higherb) price volatility is highc) investors are willing to invest in high-yielding currenciesd) price volatility is low

2. The main interest rate of FED is:

a) reference rateb) overnight ratec) federal funds rated) base rate

3. Momentum strategya) relies heavily on technical analysisb) is based on fundamental analysisc) is consistent with the weak form of EMHd) uses computer models

4. Which currency is always the base currency in a pair according to ISO quotations:

a) USDb) CHFc) EURd) GBP

5. The current account balance:a) summarizes the flow of goods, services, income and transfer paymentsinto and out of the countryb) when positive, creates demand for countrys currency thus making itstrongerc) when negative, creates demand for countrys currency thusmaking it strongerd) is held to be fair indicator of a countrys international competitiveness

6. 3 main active currency management strategies are:a) Carry, scalping, valuationb) Momentum, carry, investing against the trendc) Valuation, momentum , hedgingd) Carry, Momentum, Valuation

7. Interest rates in Japan for many years were very close to 0 TRUE/FALSE

8. One of the aasumptions of Balassa-Samuelson effect is that poor countries are relativelymore productive in traded goods sector TRUE/FALSE

9. Norvegian Krone is taken into account in S&P Currency Arbitrage Index TRUE/FALSE

10.At the beginning of Year 1 the exchange rate was A/B= 1.20.At the end of the Year 1, inflation in Country A has been 8% and inflation in Country Bhas been 3%. Taking into account only inflation calculate new exchange rate:

E1= 1.2 * (1+0.03)/(1+0.08) = 1.771 = A/B

23. JAKUB HLUZOW


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1. In the quotation PLN/JPY the JPY currency is called:a) the base currencyb) the counter currencyc) the basic currency

d) the counterpart currency

2. In a currency swap:a) includes only two counterpartiesb) includes any numer of willing counterpartiesc) includes exchange streams of interest payments in the same currenciesd) includes exchange streams of interest payments in different currencies

3. The tom/next swap is a rate at which:a) currency can be bought or sold against the next business day, which is also theforward date.

b) currency can be only bought or sold against the next business day, which is also theforward date.c) currency can be bought or sold against any day, which is also the spot date.d) currency can be bought or sold against the next business day, which is alsothe spot date.

4. One of the oldest measures of fair value is: a) purchasing power parityb) consumer price indexc) producer price indexd) purchasing power index

5. Foreign exchange swap can be divided into:a) localb) internationalc) cross-culturald) cross-border

6. The symbol D in the outright rate equationstands for:a) the number of days that have to be delayedb) the domestic interest ratec) the duration of the FX swapd) none of the above

7. Reporting dealers are defined as financial institutions that actively participate inglobal foreign exchange markets. TRUE/FALSE

8. Premiums and discounts reflect the interest rate differentials between currencies atthe time the deal is done. TRUE/FALSE


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9. In a carry trade, traders sell currencies yielding low interest rates vs. currencies with a higherinterest rate. TRUE/FALSE

10. Calculate the PLN/EUR cross-rate:\

PLN/CHF 3.5013/3.5199EUR/CHF 0.8919/0.9001

24 Robert Siedlaczek

1. PIP Stands For:a) Private Interest Protectionb) Point in Privacyc) Price interest pointd) Protected In Private

2. In order to compute the outright rate, you needa) The spot rateb) The number of daysc) The interest rates for both currenciesd) The number of months

3. Fx swaps have two basic uses:

a) To switch a deal from one currency to another, and back again, on a hedged basis.

b) To move a given currency deal forward or backward in time.c) To move a given currency deal forward.

d) To move a given currency deal backward.

4. Tomorrow means

a) The next working day after today

b) every other day

c) every day except church days

d) the next not - working day

5. Momentum managers typically base their decisions on :

a) computer modelsb) technical analysisc) fundamental analysisd) none of the above

6. The Asian Session.


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a) At around 7:00 pm Eastern U.S. time, midnight London time, Japan wakens and the

forex markets begin to stir.

b) At around 12:00 pm Eastern U.S. time, midnight London time, Japan wakens and the forexmarkets begin to stir.c ) At around 10:00 pm Eastern U.S. time, midnight London time, Japan wakens and the forexmarkets begin to stir.d) none of above

7 . The outright rates usually differ from the spot rate, but they are not a forecast

for the spot rate at the end of the term TRUE/False

8. One of the fx swaps basic uses is to move a given currency deal forward or

backward in time TRUE/FALSE

9. Generally trading currencies is useful only for purposes connected with trade in

goods and services TRUE/FALSE

10.Calculate the PLN/EUR cross-rate:\

PLN/CHF 3.4879/3.4999EUR/CHF 0.8876/0.9012

25. Tomek Czernecki

1. According to Balassa-Samuelson effect prices is cheaper in all countries then GDP are lowerthen 15%.FALSE

2. One of the basic FX swap use is:a) to hedge againt interest rate risk

b) to buy or sell a currency with another currency at a specified exchange rate during a

specified period

c) to move a given currency deal forward or backward in time

d) to estimate the minimum price movement in a given currency pair

3. PIP stands for:

a) "price interest point."

b) premium index point

c) purchasing index power

d) price interest premium

4. In which version of the PPP theory, the change in the

exchange rate over a period will equal the differential

inflation rates between the two countries ?

a) Relative Purchasing Power Parity

b) Absolute Purchasing Power Parity


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c) Additive Purchasing Power Parity

d) Total Purchasing Power Parity

5. Direct quotation:

a) Takes the form of variable amounts of foreign currency

b) The foreign currency is the base currency.c) Takes the form of fixed amounts of domestic currency against varying amounts of foreign

currency.

d) is not related to FX market

6. Three well known trading strategies in active currency management are:

a) Carry / Momentum / Valuation

b) Momentum / Trend following / Carry

c) Valuation / Short to medium run / Carry

d) Momentum / Trend following / Short to medium run

7. Which of the factors might disrupt the Carry strategy ?

a) Volatility

b) Liquidity

c) Big spread

d) High inflation rate

8. The absence of a long or short position is called flat:

TRUE

9. The FX swap is used to move a given currency deal only backward

in time. FALSE

10. Create cross JPY/CHF

GBP/CHF 2,1702/2,1707

GBP/JPY 192,70/193,00

BID: 2,1702/193,00 = 0,011245

OFFER: 2,1707/192,70 = 0,011265

JPY/CHF 0,011245/0,011265

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