Finastra Assessment Test Finastra Assessment Treasury and Capital Markets 2 — Questions and Answers
Question 1: In Finastra's Treasury management system, what does 'netting' primarily refer to?
- Combining multiple bilateral exposures into a single net position to reduce settlement risk (Correct answer)
- Applying interest charges to overdrawn accounts at end of day
- Allocating collateral across multiple counterparties simultaneously
- Converting foreign currency balances to the base currency
Correct answer: Combining multiple bilateral exposures into a single net position to reduce settlement risk
Netting consolidates multiple obligations between parties into one net amount, reducing settlement risk and operational overhead.
Question 2: Which yield curve construction method is most commonly used in Finastra's capital markets pricing for short-term instruments?
- Nelson-Siegel parametric fitting
- Bootstrap method using market instruments (Correct answer)
- Cubic spline interpolation only
- Linear regression on historical rates
Correct answer: Bootstrap method using market instruments
The bootstrap method derives zero-coupon rates sequentially from liquid market instruments such as deposits, futures, and swaps.
Question 3: What is a 'quanto' derivative in capital markets?
- A derivative whose notional adjusts based on credit events
- A derivative where the underlying is in one currency but settled in another at a fixed exchange rate (Correct answer)
- A derivative with a variable strike price linked to inflation
- A derivative that pays based on the quantity of a commodity delivered
Correct answer: A derivative where the underlying is in one currency but settled in another at a fixed exchange rate
A quanto eliminates foreign exchange risk by fixing the exchange rate, so the payoff is denominated in a different currency than the underlying asset.
Question 4: In the context of Finastra's Kondor+ / Fusion Capital, what is the role of a 'deal blotter'?
- A report showing overnight interest accruals
- A real-time log of all trades entered during the trading session (Correct answer)
- A reconciliation tool for nostro accounts
- A module for generating regulatory capital reports
Correct answer: A real-time log of all trades entered during the trading session
The deal blotter provides traders with a real-time view of all transactions booked during the current session.
Question 5: A bank holds a 5-year fixed-rate bond funded by floating-rate liabilities. Which Finastra Treasury tool is most appropriate to hedge this exposure?
- A vanilla FX forward
- A pay-fixed, receive-floating interest rate swap (Correct answer)
- A credit default swap on the bond issuer
- A currency basis swap
Correct answer: A pay-fixed, receive-floating interest rate swap
A pay-fixed, receive-floating IRS converts the fixed cash flows from the bond into floating payments that match the funding cost.
Question 6: What does 'DV01' measure in fixed-income portfolio management within Finastra systems?
- The default probability over a one-day horizon
- The change in bond price for a one-basis-point increase in yield (Correct answer)
- The daily Value-at-Risk at a 99% confidence level
- The dividend yield over one quarter
Correct answer: The change in bond price for a one-basis-point increase in yield
DV01 (Dollar Value of 01) quantifies interest rate sensitivity as the dollar change in price per one-basis-point move in yield.
Question 7: Under Basel III liquidity rules relevant to Finastra's liquidity management modules, what does the Net Stable Funding Ratio (NSFR) enforce?
- Minimum capital reserves against market risk
- A 30-day liquidity survival horizon under stressed outflows
- A one-year stable funding requirement relative to illiquid assets (Correct answer)
- Daily reporting of intraday liquidity usage
Correct answer: A one-year stable funding requirement relative to illiquid assets
NSFR requires banks to maintain sufficient stable funding relative to their illiquid assets and off-balance-sheet exposures over a one-year horizon.
Finastra Assessment Test Finastra Assessment Treasury and Capital Markets 2
In Finastra's Treasury management system, what does 'netting' primarily refer to?