Risk Latte - Interview Questions # 7: FX Spots, Forwards & Options

Interview Questions # 7: FX Spots, Forwards & Options

Team Latte
Oct 01, 2007


  1. Dollar-Swiss is currently trading at 1.4500. The trader tells you that he expects the Dollar-Swiss to go up by five biggies (big figure) in three months time. What he means is that in three months time the spot USD/CHF will trade at:

    1. 1.4800
    2. 1.4900
    3. 1.5000
    4. None of the above;


  2. Dollar-Yen is trading at 120.00. If the FX rates moves up to 121.50, then means that:

    1. Dollar has strengthened
    2. Dollar has weakened
    3. Yen has strengthened;
    4. None of the above;


  3. Cable (GBP/USD) is trading at 1.9525. If you buy cable (GBP/USD) then this means:

    1. you buy GBP at 1.9525 against the Dollar;
    2. you buy GBP and sell the Dollar at 1.9515;
    3. you go long on GBP and short on USD;
    4. All the above;


  4. USD/JPY is trading in the spot market at 110.00. Japanese interest rates are 1.00% and the U.S. interest rates are 5.00%. You would expect to see the One year USD/JPY forward price quoted at:

    1. 105.25
    2. 104.95
    3. 105.81
    4. 105.08


  5. A customer wants to buy Dollars and sell Yen in the spot market for a notional amount of US$100 million and comes to you for a quote. The most common (likely) way that you would ask for a quote to your trader for this transaction is:

    1. Dollar-Yen for ten dollars;
    2. Dollar-Yen for hundred dollars;
    3. Yen-Dollar for ten dollars;
    4. Yen-Dollar for hundred dollars;


  6. You want to buy Dollar-Yen and ask for a quote from your trader/dealer. He quotes you "121 fifty sixty" (121.50/60). If you were to take the trader's price then it will mean that:

    1. you'll buy Dollars and sell Yen at 121.60;
    2. you'll buy Dollars and sell Yen at 121.50;
    3. you'll buy Dollars and sell Yen at 121.55 (mid-market);
    4. you'll sell Dollars and buy Yen at 121.60


  7. A dealer (trader) quotes a bid-offer for USD/CHF as 1.2540/50. The bid price for CHF/USD would be:

    1. 0.7968
    2. 0.7974
    3. 0.7945
    4. 0.7971


  8. USD/CHF spot is being quoted at 1.2500/05 and the three month forward points are quoted at 62/63. The bid ask spread in the forward (outright, i.e. the forward rate) quote would be:

    1. 1 pip
    2. 2 pips
    3. 5 pips
    4. 6 pips


  9. Answers:

    1 (c)
    2 (a)
    3 (d)
    4 (c)
    5 (c)
    6 (a)
    7 (a)
    8 (d)


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