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Calculation Of Net Position And Foreign Exchange Holdings By A Bank

Question

Swiss Bank USA has the following foreign exchange positions in its trading portfolio, reported in dollars: $40 long in Swiss francs (SF), $20 million short in Swiss francs, $35 million long in Euros (€) and $20 million short in €, $30 million long in British pounds (£) and $50 million short in £. It uses the standardized framework proposed by the Bank for International Settlements (BIS) to estimate its capital charge for its foreign exchange positions.

1. What are the net positions for each foreign exchange held in the portfolio?
    a. $20 million short in SF, $15 million long in €, and $20 million short in £.
    b. $20 million short in SF, $15 million long in €, and $20 million long in £.
    c. $20 million long in SF, $15 million long in €, and $20 million long in £.
    d. $20 million long in SF, $15 million long in €, and $20 million short in £.
    e. $20 million long in SF, $15 million short in €, and $20 million short in £.

2. What is the capital charge for its foreign exchange holdings using the BIS short hand method?
    a. $1.6 million.
    b. $2.8 million.
    c. $3.2 million.
    d. $4.0 million.
    e. $4.4 million.


Summary

These short questions belong to Finance and it is about calculating the net positions for each foreign exchange held and the capital charge for the foreign exchange holdings by a bank which includes Swiss Francs, Euros, British Pounds and American Dollars.

Total Word Count 94

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