Finastra Assessment Test Finastra Assessment Treasury and Capital Markets 5 — Questions and Answers
Question 1: What distinguishes a 'hard call' provision from a 'soft call' provision in a callable bond, as classified in Finastra's securities master?
- A hard call allows redemption only at a premium; a soft call allows redemption at par
- A hard call prohibits redemption for a fixed period; a soft call permits early redemption only if the stock price exceeds a threshold (Correct answer)
- A hard call applies to government bonds; a soft call applies to corporate bonds
- A hard call requires shareholder approval; a soft call is at management discretion
Correct answer: A hard call prohibits redemption for a fixed period; a soft call permits early redemption only if the stock price exceeds a threshold
A hard call (lockout) period absolutely bars early redemption, while a soft call allows it only when a specified price condition — typically a stock price hurdle — is met.
Question 2: In Finastra's ALM module, 'economic value of equity' (EVE) is best described as:
- The present value of future net interest income over 12 months
- The difference between the market value of assets and the market value of liabilities (Correct answer)
- The regulatory Tier 1 capital divided by risk-weighted assets
- The cumulative unrealized gains in the available-for-sale portfolio
Correct answer: The difference between the market value of assets and the market value of liabilities
EVE equals the net present value of all asset cash flows minus the net present value of all liability cash flows, capturing the balance sheet's long-term interest rate sensitivity.
Question 3: Which Finastra module is specifically designed to handle Securities Finance transactions such as securities lending and repo?
- Fusion Banking Essence
- Fusion Capital — Securities Finance (formerly Opics) (Correct answer)
- Fusion Payments
- Fusion Risk — Credit Risk Engine
Correct answer: Fusion Capital — Securities Finance (formerly Opics)
Fusion Capital's Securities Finance component (evolved from Opics) manages repo, reverse repo, securities lending, and collateral across the trade lifecycle.
Question 4: A trader uses a 'bull steepener' strategy in a rates portfolio. What does this imply about the expected yield curve movement?
- Short-end rates rise more than long-end rates, flattening the curve
- Short-end rates fall more than long-end rates, steepening the curve (Correct answer)
- Long-end rates rise while short-end rates remain unchanged
- The entire curve shifts upward in a parallel fashion
Correct answer: Short-end rates fall more than long-end rates, steepening the curve
A bull steepener occurs when short-term rates decline faster than long-term rates (often driven by central bank easing), widening the spread between short and long maturities.
Question 5: In Finastra's cross-currency swap pricing, the 'cross-currency basis' represents:
- The difference between the fixed rates in two different currencies
- The spread added to one leg of a currency swap to equate the present values of both legs in the market (Correct answer)
- The haircut applied to foreign currency collateral under a CSA
- The bid-ask spread on an FX spot transaction
Correct answer: The spread added to one leg of a currency swap to equate the present values of both legs in the market
The cross-currency basis is a market-observed spread (often negative for EUR/USD) reflecting supply and demand imbalances in dollar funding, required to make the swap fair-valued.
Question 6: When Finastra's system performs an 'accrual' calculation on a money market deposit, which day count convention is standard for USD deposits?
- Actual/365 Fixed
- 30/360 Bond Basis
- Actual/360 (Correct answer)
- Actual/Actual ICMA
Correct answer: Actual/360
USD money market instruments, including deposits and commercial paper, use the Actual/360 convention, dividing actual days elapsed by a 360-day year.
Question 7: In Finastra's trade lifecycle management, what triggers a 'reset event' on a floating-rate note or swap?
- A rating downgrade of the reference entity below investment grade
- The periodic fixing of the reference rate (e.g., SOFR or EURIBOR) for the upcoming coupon period (Correct answer)
- The exercise of an embedded option by the holder
- A collateral substitution request from the counterparty
Correct answer: The periodic fixing of the reference rate (e.g., SOFR or EURIBOR) for the upcoming coupon period
A reset event occurs on each fixing date when the reference benchmark rate is observed and locked in to determine the coupon payment for the next interest period.
Finastra Assessment Test Finastra Assessment Treasury and Capital Markets 5
What distinguishes a 'hard call' provision from a 'soft call' provision in a callable bond, as classified in Finastra's securities master?