Finastra Assessment Test Finastra Assessment Treasury and Capital Markets 4 — Questions and Answers
Question 1: In Finastra's Fusion Capital Markets, what does 'theta' represent in an options position?
- Sensitivity of option price to a 1% change in volatility
- Sensitivity of option price to a 1-basis-point change in interest rates
- Rate of time decay — the decrease in option value as expiry approaches (Correct answer)
- Sensitivity of delta to changes in the underlying price
Correct answer: Rate of time decay — the decrease in option value as expiry approaches
Theta measures how much an option's value decreases with each passing day, all else being equal, due to the erosion of time value.
Question 2: A treasury desk wants to lock in a future borrowing rate starting in 3 months for a 6-month period. Which instrument is most appropriate in Finastra's system?
- An overnight indexed swap (OIS)
- A 3×9 Forward Rate Agreement (FRA) (Correct answer)
- A 1-year interest rate cap
- A 6-month cross-currency basis swap
Correct answer: A 3×9 Forward Rate Agreement (FRA)
A 3×9 FRA locks in the interest rate for a 6-month borrowing starting 3 months from today, exactly matching the treasury desk's requirement.
Question 3: What is 'central clearing' of OTC derivatives, as supported by Finastra's CCM module?
- Netting all intraday FX payments through SWIFT CLS
- Interposing a CCP between buyer and seller so each faces the CCP rather than each other (Correct answer)
- Automatically booking mirror trades in the banking book
- Consolidating all trades under a single ISDA master agreement
Correct answer: Interposing a CCP between buyer and seller so each faces the CCP rather than each other
Central clearing replaces bilateral counterparty risk with CCP risk, as the CCP becomes the buyer to every seller and the seller to every buyer.
Question 4: In Finastra's liquidity stress testing, what does a 'liquidity gap' report show?
- The difference between regulatory capital held and the minimum required
- The mismatch between cash inflows and outflows across future time buckets (Correct answer)
- The spread between LIBOR and OIS rates on a given date
- The difference between book value and fair value of the loan book
Correct answer: The mismatch between cash inflows and outflows across future time buckets
A liquidity gap report plots the net surplus or deficit of cash flows in each maturity bucket, identifying periods where outflows exceed inflows.
Question 5: Which pricing model is most commonly applied to interest rate caps and floors in Finastra's derivatives pricing library?
- Heston stochastic volatility model
- Black-76 model applied to forward rates (Correct answer)
- Binomial tree model with 1,000 steps
- Vasicek one-factor short-rate model
Correct answer: Black-76 model applied to forward rates
Black-76 adapts the Black-Scholes formula to futures and forward prices, making it the market standard for pricing caps, floors, and swaptions.
Question 6: What is the role of a 'Credit Support Annex' (CSA) in the context of Finastra's collateral management workflows?
- It defines the schedule of coupon payments for structured notes
- It governs the exchange of collateral (variation margin) between OTC derivative counterparties (Correct answer)
- It specifies the haircuts applied to sovereign bond collateral for repo transactions
- It details the procedures for novating a trade to a new counterparty
Correct answer: It governs the exchange of collateral (variation margin) between OTC derivative counterparties
A CSA is an ISDA document that sets out the terms — thresholds, minimum transfer amounts, eligible collateral — under which parties exchange variation margin.
Question 7: In Finastra's Fusion Treasury, 'position keeping' at the end of day involves:
- Closing all open trades and booking realized P&L only
- Marking all open positions to market and carrying them forward as the next day's opening positions (Correct answer)
- Transferring all intraday positions to the banking book automatically
- Netting positions within the same currency pair before reporting
Correct answer: Marking all open positions to market and carrying them forward as the next day's opening positions
End-of-day position keeping marks open trades to current market prices, locking in unrealized P&L and establishing the starting inventory for the next trading day.
Finastra Assessment Test Finastra Assessment Treasury and Capital Markets 4
In Finastra's Fusion Capital Markets, what does 'theta' represent in an options position?