Module 7 - Treasury and Money Market Operations

Question 1

Refer to the buying and selling of government securities, lending/borrowing against underlying assets as collateral, accepting of fixed term deposits, and other monetary instruments of BSP aimed at influencing the underlying demand and supply conditions for money.

Answer 1

Money operations

Question 2

refers to the Bangko Sentral’s monetary instrument where the Bangko sentral sells government securities with a commitment to buy them back at a later date.

Answer 2

Reverse Repurchase Agreements

Question 3

is a bangko sentral standing facility which allows counterparties to obtain overnight liquidity from the Bangko Sentral on an open-volume basis against eligible collateral.

Answer 3

Overnight Lending Facility

Question 4

is a bangko sentral standing facility which allows banks to place overnight deposits with the bangko sentral.

Answer 4

Overnight Deposit Facility

Question 5

is a key liquidity absorption facility of the Bangko Sentral used to withdraw liquidity from the system in bulk.

Answer 5

Term Deposit Facility

Question 6

may be a significant source of operational risk, apart from giving rise to market, liquidity and credit risks.

Answer 6

treasury activities

Question 7

refer to debt and equity securities, hybrid securities, derivatives, securitization structures and similar products with substantial investment characteristics.

Answer 7

Financial products

Question 8

a person engaged in the business of buying and selling securities for the account of others.

Answer 8

Broker

Question 9

a person who buys and sells securities for own account in the ordinary course of business.

Answer 9

Dealer

Question 10

refer to financial products whose terms, features and risks are not reasonably likely to be understood by a non-sophisticated client because of their complex structure

Answer 10

Complex products

Question 11

funds or amount of exposure to be hedged.

Answer 11

Investment amount

Question 12

the client’s financial standing, which includes information on assets, net worth, financial commitments, regular income and capacity tio withstand losses.

Answer 12

Financial situation

Question 13

the client’s knowledge and understandfng of the financial markets and products and the risks involved therein.

Answer 13

Knowledge of financial products

Question 14

the nature of investments and/or derivatives transactions undertaken by the client.

Answer 14

Investment/hedging experience

Question 15

the client’s goal or purpose for entering into a transaction, whether it be for regular income, capital appreciation, capital preservation, maintenance of purchasing power, hedging as against investment.

Answer 15

Financial objectives

Question 16

the client’s goal or purpose for entering into a transaction, whether it be for regular income, capital appreciation, capital preservation, maintenance of purchasing power, hedging as against investment.

Answer 16

Financial objectives

Question 17

the level of risk a client is willing to take

Answer 17

Risk appetite

Question 18

the length of time over which the position or exposure to be hedged will be held by the client.

Answer 18

Holding period/investment horizon

Question 19

prohibitions or limitations imposed on the activity of the client by existing laws, rules and regulations

Answer 19

Regulatory and legal constraints

Question 20

the client’s need to convert positions into cash and the timing of such requirement.

Answer 20

Liquidity needs

Question 21

refers to any financial institutions, only with respect to the instruments in which it is authorized to engage as a broken dealer.

Answer 21

Market counterparty

Question 22

refers to an institution that is not a market counterparty but has the level of net worth, knowledge, expertise, and experience to deal with the financial products.

Answer 22

Sophisticated institutional client

Question 23

refers to an individual who has demonstrated to the BSFI that he has the level of net worth, knowledge, and experience to deal with financial products.

Answer 23

Sophisticated individual client

Question 24

refer to all other institutional or individual clients not categorized as market counterparty, sophisticated institutional client or sophisticated individual client.

Answer 24

Other clients

Question 25

client prefers an investment and/or hedging strategy where the primary goal is to prevent the loss of principal.

Answer 25

Conservative

Question 26

client is willing and able to expose funds to a moderate level of risk in consideration for higher returns or to meet certain objectives.

Answer 26

Moderate

Question 27

client is willing and able to accept higher risks involving volatility of return and even possible loss of investment in return for potentially higher long term results.

Answer 27

Aggressive

Question 28

is a broadly defined as a financial instrument that primarily derives its value from the performance of an underlying variable.

Answer 28

Derivative

Question 29

shall also include transactions in cash instruments with embedded derivatives that reshape the risk-return profile of the host instrument.

Answer 29

Financial derivatives activities

Question 30

is defined as a financial market participant that enters, for its own account, in a derivatives transaction for legitimate economic purposes.

Answer 30

end-user

Question 31

refers to any UB or KB, only with respect to the instruments for which it is authorized to engage in as a dealer.

Answer 31

Market counterparty `

Question 32

refers to an institution which is not a market counterparty and has the level of net worth, knowledge, expertise, and experience to deal with financial derivatives.

Answer 32

Institutional counterparty

Question 33

refers to an individual who has demonstrated to the bank as having the level of net worth, knowledge and experience in dealing with financial products.

Answer 33

sophisticated individual end user

Question 34

This refers to all other institutional or individual clients not categorized as market counterparty, institutional counterparty, or sophisticated individual end user.

Answer 34

other end user

Question 35

is a financial market participant that facilitates a derivatives transaction between a dealer and it’s client

Answer 35

broker

Question 36

is defined as a financial market participant that engages in a derivatives activity as an originator of derivatives products or as market-maker in derivatives products.

Answer 36

dealer

Question 37

refers to a financial contract between two parties, the protection buyer and protection seller.

Answer 37

Credit default swaps

Question 38

refers to a pre-funded credit derivative instrument under which the note holder affectively accepts the transfer of credit.

Answer 38

-Credit linked note

Question 39

refers to an arrangement in which two parties exchange a series of cash flows.

Answer 39

Currency swaps

Question 40

refers to an agreement for delayed delivery of a foreign currency in which the buyer agrees to purchase and the seller agrees to deliver.

Answer 40

Forward FX contracts

Question 41

refers to an agreement fixing the interest rates for a specified period whereby the buyer receives (or pays) and the seller pays (or receives) the interest rates…

Answer 41

Forward rate agreement

Question 42

refers to FX risk

Answer 42

FX exposure

Question 43

refers to an actual FX commitment

Answer 43

FX obligation

Question 44

refers to option contracts

Answer 44

FX options

Question 45

refers to an agreement involving an initial exchange

Answer 45

FX swaps

Question 46

refers to an agreement in which the parties agree to exchange interest cash flows …

Answer 46

Interest rate swaps