QFC Regulatory Compliance & Ethics 2

Question 1

Under the Dodd-Frank Act, which entity is primarily responsible for regulating swap dealers and major swap participants?

Accepted Answer

CFTC

Answer

The CFTC has primary jurisdiction over swap dealers and major swap participants under Dodd-Frank Title VII.

Question 2

A quantitative analyst discovers a model error that overstates the firm's VaR by 30%. Under CFA Institute Standards, what is the FIRST action to take?

Accepted Answer

Report the error to supervisors and risk management

Answer

CFA Standard IV(C) requires reporting material errors through internal channels to supervisors and risk management immediately.

Question 3

Which Basel III requirement specifically addresses banks holding high-quality liquid assets to survive a 30-day stress scenario?

Accepted Answer

Liquidity Coverage Ratio (LCR)

Answer

The LCR requires banks to hold sufficient High-Quality Liquid Assets (HQLA) to cover net cash outflows over a 30-day stress period.

Question 4

Front-running in a quantitative trading context refers to:

Accepted Answer

Trading a security ahead of a pending client order to profit from the price movement

Answer

Front-running is trading on advance knowledge of pending client orders to benefit from the resulting price movement, which is prohibited.

Question 5

Under MiFID II, what is the primary purpose of transaction reporting requirements for investment firms?

Accepted Answer

To enable regulators to detect market abuse and monitor systemic risk

Answer

MiFID II transaction reporting enables competent authorities to detect and investigate potential market abuse and monitor market integrity.

(QFC) Quantitative Finance Certification Practice Test

(QFC) Quantitative Finance Certification Practice Test

QFC Regulatory Compliance & Ethics 2