A Customer Asks for a Price in 3-Month CHF/JPY

question 320

Multiple Choice

A customer asks for a price in 3-month CHF/JPY. You quote 56/54. The customer deals at 54. What have you done?

• A) Bought CHF against JPY spot and sold JPY against CHF 3-month forward
• B) Sold CHF against JPY spot and bought CHF against JPY 3-month forward
• C) Bought CHF against JPY spot and sold CHF against JPY 3-month forward
• D) Bought JPY against CHF 3-month outright

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Definitions:

Systematic Risk

Systemic risk associated with the overall market or a particular segment of the market, widely known as market risk, remains even after diversification efforts.

Unsystematic Risk

The risk of price change due to the unique circumstances of a specific security, as opposed to the overall market.

Security Market Line

A representation in financial market theory plotting the expected return of an asset or a portfolio against its risk (beta), under the Capital Asset Pricing Model.

Diversified Investors

Individuals or entities that spread their investments across various asset classes and sectors to minimize risk.