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ACI 3I0-008 Exam Syllabus

ACI 3I0-008 Exam

ACI Dealing Certificate

Total Questions: 251

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ACI 3I0-008 Exam Overview :

Exam Name ACI Dealing Certificate
Exam Code 3I0-008
Actual Exam Duration 90 minutes
Expected no. of Questions in Actual Exam 60
Official Information https://acifma.com/aci-dealing-certificate
See Expected Questions ACI 3I0-008 Expected Questions in Actual Exam
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ACI 3I0-008 Exam Topics :

Section Weight Objectives
1. Financial Markets Environment 10%
  • Define financial markets and explain their main functions for the economy.
  • Define foreign-exchange markets, money markets, capital markets and commodities markets.
  • Describe how the main economic agents can impact financial markets.
  • Outline how financial markets can be segmented under different criteria: term to maturity,  product  phase  (primary  and  secondary),  trade  dates  and  settlement  dates, location and regulation, and dealing structures.
  • Distinguish between cash/spot and derivatives/forward markets.
  • Distinguish  between  regulated  markets  and  OTC  markets,  and  understand  how both functions work.
  • Identify the various types of regulated markets and their dealing structures.
  • Outline and describe the roles of the main participants in financial markets.
  • Define the function of market-making, explain the incentives to make markets and the main risks involved in market-making.
  • Understand how available information impacts the efficiency of markets.
  • Explain the key functions of every phase of a financial markets’ transaction, from front office execution to settlement and reporting, distinguishing which steps are responsibility of the front, middle and back-office roles.
  • Understand what are the FX Global Code, the Global Precious Metals Code and the United Kingdom Money Markets Code.
  • Describe  and  outline  the  development  of  the  FX  Global  Code,  of  the  Global Precious Metals Code and of the United Kingdom Money Markets Code.
  • Explain the scope, applications and objectives of the FX Global Code, of the Global Precious Metals Code and of the United Kingdom Money Markets Code.
  • Define  and  identify  the  Market  Participants  of  the  FX  Global  Code,  of  the  Global Precious Metals Code and of the United Kingdom Money Markets Code.
  • Explain  the  leading  principles  of  the  FX  Global  Code  and  of  the  Global  Precious Metals Code, as well as explain the underpinning principles of the United Kingdom Money Markets Code.
  • Understand  the  Statement  of  Commitment  to  the  FX  Global  Code,  to  the  Global Precious  Metals  Code  and  to  the  United  Kingdom  Money  Markets  Code,  and  how the respective Statement outline the objectives of each of those Codes.
  • Understand what are the main regulations applicable to financial markets and their products, as well as their scope, applications and objectives: Markets in Financial Instruments  Directive  II  (MiFID  II,  including  its  Regulation  MiFIR),  Market  Abuse  Regulation (MAR), Benchmarks Regulation (BMR), Dodd-Frank Wall Street Reform and Consumer Protection Act, European Market Infrastructure Regulation (EMIR), Basel I, Basel II and Basel III.
2. Foreign Exchange 18
  • Distinguish  the  preferred  base  currency  and  the  quoted  currency  in  standard exchange rate notation in a currency pair.
  • Identify the ISO codes for the currencies of the G20 countries.
  • Distinguish between the “big figures” and the “points/pips” in a currency pair.
  • Identify  a  bid/offer  spot  exchange  rate  as  price-maker  and  as  price-taker  to calculate either a base or quoted currency amount.
  • Identify the best of several spot rates as the buyer or as the seller of an amount of base or quoted currency.
  • Understand  and  define  the  basic  dealing  terminology  and  characteristics  of  FX spot, FX outright forward, FX swap and forward-forward FX swaps.
  • Calculate  cross-rates  from  a  given  pair  of  exchange  rates  with  all  the  possible combinations between base and common currencies.
  • Calculate and explain the reciprocal rate of an exchange rate.
  • Outline the mechanics and roles of benchmark fixings for FX rates.
  • Calculate a FX outright forward rate from a FX spot rate, interest rates and/or the forward points (and vice versa).
  • Explain the relationship between the outright forward rate, the forward points, the spot rate and interest rates, including the concept of interest rate parity as well as the concept and possibility of covered interest arbitrage.
  • Calculate forward cross-rates.
  • Define forward value dates for standard periods and list those periods.
  • Describe the structure and mechanics of an FX outright forward and of a FX swap, outline how a FX  outright forward can be hedged with a FX spot transaction and money  market  transactions  and  outline  how  a  FX  swap  can  be  used  in  place  of money  market  transactions  to  hedge  an  FX  outright  forward  and  in  creating synthetic foreign currency asset and/or liabilities.
  • Explain the structure and mechanics of FX forward-forward swaps.
  • Understand the concepts of historic rate rollovers and of early or late settlement in FX transactions.
  • Outline  the  application  of  tom/next  and  overnight  FX  swaps  in  rolling  over  spot positions  and  hedging  value-  tomorrow  and  value-today  outright  rates,  and calculate  a  value-tomorrow  rate  from  a  spot  rate  and  tom/next  points,  and  a  value-today rate from a spot rate, tom/next points and overnight points.
  • Calculate broken-dated FX outright forward rates through linear interpolation.
  • Understand the concepts of deliverable and non-deliverable currencies.
  • Define  a  Non-Deliverable  Forward  (NDF),  explain  its  rationale  and  describe  the structure and the features of these instruments.
  • Identify the  commodities called  precious  metals (gold, silver, platinum and palladium) and give their ISO codes.
  • Describe  the  conventional  method  of  quoting  gold  in  the  international  market  in US dollars per ounce.
  • Identify  a  bid/offer  spot  price  as  price-maker  and  as  price-taker  to  calculate  the value of a given weight of precious metals.
  • Distinguish between the spot, forward and derivative markets in precious metals.
  • Outline the mechanics and role of the precious metals’ benchmark fixings.
3. Rates 18% • Define the money markets and interest rate capital markets.
• Describe the main features of the basic types of cash money market instrument in terms of whether or not they are transferable or secured; in which form they pay return  (i.e.  discount,  interest  or  yield);  how  they  are  quoted;  internationally recognised minimum and maximum terms; and the typical borrowers/issuers and lenders/investors that use each type.
• Outline generally accepted terminology to  describe the cashflows of each type of instrument and understand basic dealing terminology.
• Calculate  present  value  and/or  future  value  using  the  arithmetic  techniques  of discounting  and/or  compounding  for  a  money  market  instrument  terminated  at  maturity and/or for one that is rolled over at maturity.
• Calculate simple interest rates using different day count and annual basis conventions, identify the international day count and annual basis conventions for the currencies of the G20 countries.
• Identify same-day, next-day, spot and forward value dates, and maturities under the  following  business  day,  modified  following  business  day,  preceding  business day conventions and end/end rule.
• Identify  the  conventional  frequency  and  timing  of  payments  for  cash  money market  instruments,  including  those  with  an  original  term  to  maturity  of  more than one year.
• Calculate broken dates and rates through linear (straight line) interpolation.
• Define interest rate indices, their methodologies and outline the most internationally used benchmark indices in the rates’ markets.
• Calculate  interest  rates  and  yields  between  the  money  market  basis  and  bond basis in currencies for which there is a difference, and between annual and semi-annual compounding frequencies.
• Calculate  the  value  of  a  discount-paying  money  market  instrument  from  its discount rate (straight discount) and calculate a discount rate directly into a true yield.
• Describe the various shapes of a yield curve and basic changes in its shape using market terminology and outline how the shape of the curve can be explained by theories and hypothesis (market segmentation, liquidity preference and expectations).
• Describe  the  main  characteristics  of  bond  instruments  as  fixed-income  securities and their roles in the function of interest money markets.
• Distinguish  between  and  define  what  is  meant  by  domestic,  foreign  and  euro currency (offshore) money and bond markets and describe the principal advantages of euro money market instruments.
• Distinguish coupon bonds, zero coupon bonds, covered bonds, sukuk bonds, junk bonds, bond indentures, callable bonds, convertible bonds and floating rate bonds.
• Identify and outline the main characteristics of Islamic money market instruments (mudharabah and murabahah).
• Describe  the  differences  and  similarities  of  classic  repos  and  sell/buy-backs  in terms of their legal, economic and operational characteristics.
• Identify and outline the main types of custody arrangements in repo.
• Calculate  the  value  of  each  type  of  instrument  (except  bond  instruments)  using quoted prices, including the secondary market value of transferable instruments.
• Calculate  the  present  and  future  cashflows  of  a  repo  given  the  value  of  the collateral and an agreed initial margin.
• Define haircuts and calculate the present and future cashflows of a repo given the value of the collateral and the usage of haircuts.
• Define general collateral (GC) and specials.
• Describe and outline the main features of securities financing transactions (SFTs) using  lending  and  borrowing  of  bonds  or  commodities,  using margin  lending  and their main characteristics.
• Identify the collateral types and their role in SFTs.
• Understand the main characteristics and objectives of short selling strategies.
• Describe what happens in a repo and other SFTs when income is paid on collateral during  the  term  of  the  transaction,  in  an  event  of  default  and  in  the  event  of  a failure by one party to deliver collateral.
• Describe the mechanics and explain the terminology of a forward-forward loan or deposit, and the interest rate risk created by these instruments.
• Calculate a forward-forward rate from two mismatched cash rates and a cash rate from a series of forward-forward rates for consecutive periods.
4. FICC Derivatives 14%
  • Describe the main concepts and product definitions of derivatives markets.
  • Explain  the  objectives,  risks  and  advantages  in  the  utilisation  of  derivatives  in financial markets, from trading to risk management.
  • Define  currency  options,  explain  their  terminology  and  distinguish  these  options with  other  currency  derivatives  and  explain  how  they  can  be  used  to  hedge  currency risk.
  • Describe the functions and characteristics of calls and puts, and how they can be combined in the creation of risk reversal (cylinders), straddle and strangle option products.
  • Define strike price, market price, the underlying, premium, exercise type, exercise rights and expiry in currency options.
  • Calculate  the  cash  value  of  a  premium  quote  in  OTC  currency  options,  describe how OTC and exchange-traded currency options are quoted, and when a premium of an OTC currency option is conventionally paid.
  • Describe the pay-out profiles of long and short positions in calls and puts.
  • Explain  how  FRAs,  Interest  Rate  Swaps,  Basis  Swaps,  Money  Market  Swaps  and Money Market Futures are derivatives of forward-forward positions.
  • Explain how FRAs, Interest Rate Swaps, Money Market Swaps and Money Market Futures can be used to hedge interest rate risk.
  • Describe  the  mechanics  and  terminologies  of  FRAs,  Basis  Swaps,  Money  Market Futures and Interest Rate Swaps (including Overnight Indexed Swaps).
  • Outline  the  contract  specifications  of  the  main  Money  Market  Futures  (Euribor, Eurodollar, Short Sterling, Euroswiss, Euroyen).
  • Define  collateral  procedures  in  Money  Market  Futures  such  as  initial  margin, margin call and margin maintenance.
  • Outline  the  principal  differences  between  OTC  instruments  like  FRAs  and  the Exchange-Traded instruments like Money Market Futures.
  • Describe how a futures exchange and clearing house works.
  • Explain  how  Money  Market  Futures  can  be  used  to  hedge  and  price  FRAs  and Interest Rate Swaps
  • Calculate  the  settlement  amount  of  FRAs  at  maturity  against  their  benchmark index.
  • Identify and distinguish the main Overnight Indexed Swaps (OIS) used in interest rate markets (€STR, Fed Funds, Saron and Sonia).
  • Define  interest  rate  options,  explain  their  terminology,  distinguish  these  options with  other  interest  rate  derivatives  and  explain  how  they  can  also  be  used  to  hedge interest rate risk.
  • Explain  the  functions  and  characteristics  of  caps,  floors  and  swaptions,  and  how caps and puts can be combined in the creation of collar option products.
  • Define  strike  price,  market  price,  the  underlying,  premium,  exercise  type  and expiry in interest rate options.
  • Calculate the cash value of a premium quote in OTC interest rate options, describe how OTC interest rate options are quoted, and when a premium of an OTC interest rate option is conventionally paid.
  • Describe the pay-out profiles of long and short positions in caps and floors.
  • Define the intrinsic and time values of options and identify the main determinants of an option premium.
  • Define delta, gamma, theta, rho and vega in options.
  • Understand a delta number and outline what is meant by delta hedging.
  • Explain  what  is  meant  by  In-The-Money,  Out-Of-The-Money  or  At-The-Money  in options.
  • Explain the basic concepts of mark-to-market calculations for derivatives.
5. Financial Markets Applications 10%
  • Understand the main risk relevance characteristics of the Basel Accords.
  • List  and  outline  the  main  risk  factors  for:  Market,  Credit,  Liquidity,  Operational, Legal, Regulatory and Reputational risk.
  • Understand and be able to explain the following aspects of Market Risk:
  • Types (Interest Rate, Equity, Currency, Commodity) and components (Position, Settlement and Counterparty);
  • How Market Risk arises in the Trading Book;
  • Key concepts of Value at Risk and its quantitative techniques;
  • The sensitivity tools for Market Risk: duration, basis point value and greeks;
  • Limit structures in the dealing room.
  • Understand and be able to explain the following aspects of Credit Risk:
  • Categories of credit risk: lending, issuer, settlement, counterparty credit risk;
  • Managing credit risk: limits and safeguards, ratings, credit approval authorities and  transaction  approval  process,  aggregating  exposure  limits  by  customers, sectors and correlations;
  • Credit  mitigation  techniques:    collateral;  termination  clauses,  re-set  clauses, cash settlement, netting agreements;
  • Documentation: covenants, ISDA / CSA.
  • Understand and be able to explain the following aspects of Liquidity Risk:
  • Objectives and importance of a funding strategy;
  • Lessons  learned  from  crises  in  liquidity  risk  management;  off-balance  sheet contingencies,  complexity,  collateral  valuation,  intra-day  liquidity  risks  and  cross-border liquidity, measuring and managing stress scenarios, early warning indicators of liquidity risk;
  • Liquid  and  non-liquid  assets,  the  meaning  and  general  concepts  of  Asset  &  Liability Management (ALM); Syllabus – ACI Dealing Certificate New Version
  • Impact of main risk factors on the balance sheet (asset and liability sides);
  • Explanation of ALM techniques: cash-flow management, duration management, liquidity gaps and mismatches;
  • Concept of funds transfer pricing as a methodology to ensure that funding and liquidity  costs  &  benefits  are  transparently  allocated  to  respective  businesses and products.
  • Understand and be able to explain the following aspects of Operational Risk:
  • Sources of operational risk: systems, people, processes and external events.
  • Understand and be able to explain the following aspects of Legal, Regulatory and Reputational Risk:
  • Sources of reputational risk and relationship to and from other risk groups;
  • Definition of Legal Risk;
  • Definition of Regulatory Risk;
  • Definition of Reputational Risk.

Updates in the ACI 3I0-008 Exam Syllabus:

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