Global Capital Markets Flashcards
7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Global Capital Markets flashcards as text
Which mechanism allows investors to profit when a foreign stock rises but the local currency depreciates against the USD?
Answer: Currency overlay strategy
A currency overlay strategy lets a portfolio manager separately manage currency exposure to preserve equity gains even when the foreign currency weakens.
In the context of global bond markets, a 'Brady Bond' is best described as:
Answer: A restructured emerging-market sovereign debt instrument collateralized by U.S. Treasuries
Brady Bonds were created in the late 1980s to restructure defaulted emerging-market sovereign loans into tradable bonds, partially backed by zero-coupon U.S. Treasuries.
The 'Tobin Tax' proposed in international finance is a tax levied on:
Answer: Short-term currency exchange transactions
James Tobin proposed a small tax on spot foreign exchange transactions to dampen speculative short-term currency trading while allowing long-term capital flows.
Which of the following best characterizes a 'dark pool' in global equity markets?
Answer: A private trading venue where large orders execute without pre-trade transparency
Dark pools are private alternative trading systems that allow institutional investors to execute large block orders anonymously, avoiding market impact from pre-trade disclosure.
A global investor observing that real interest rates in Country A are significantly higher than in Country B would, under uncovered interest rate parity, expect:
Answer: Country A's currency to depreciate relative to Country B's
UIP predicts that the higher-interest-rate currency will depreciate to eliminate arbitrage, offsetting the interest rate advantage for foreign investors.
Which global capital market index is widely used as the benchmark for international developed-market equities, excluding the United States?
Answer: MSCI EAFE Index
The MSCI EAFE (Europe, Australasia, Far East) Index is the standard benchmark for developed-market equities outside North America.
In global fixed income, 'duration mismatch' in a sovereign's external debt profile most directly increases which risk?
Answer: Liquidity risk from short-term debt rollover requirements
When a sovereign relies heavily on short-term external debt, it faces rollover risk—the need to refinance frequently at potentially higher rates or in tighter credit conditions.