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Question 1 of 4

Question 1
Q-Code: 21-L3-15-TSAE-76485
The trading desk of an investment bank receives the following two orders from the firm’s portfolio manager:
- Trade 1- To liquidate government bonds from a fixed-income portfolio to meet derivatives’ collateral requirements of $50,000.
- Trade 2- To equitize immediately using ETFs a $20 million inflow into a client’s small-capitalization equity portfolio.
Regarding the motivation to trade and trade urgency Trade 1 is a:
- A
  margin or collateral call trade with high levels of trade urgency.
- B
  profit-seeking trade with high levels of trade urgency.
- C
  cash-flow driven trade with low levels of trade urgency.
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Question 2 of 4

Question 2
Q-Code: 21-L3-15-TSAE-76486
The trading desk of an investment bank receives the following two orders from the firm’s portfolio manager:
- Trade 1- To liquidate government bonds from a fixed-income portfolio to meet derivatives’ collateral requirements of $50,000.
- Trade 2- To equitize immediately using ETFs a $20 million inflow into a client’s small-capitalization equity portfolio.
The motivation to trade associated with Trade 2 is most likely:
- A
  corporate action.
- B
  cash-flow driven.
- C
  profit-seeking.
Correct

Incorrect
Question 3 of 4

Question 3
Q-Code: 21-L3-15-TSAE-76487
To minimize market impact a trader can:
- A
  trade large orders over a shorter time.
- B
  trade small order sizes over a shorter time.
- C
  seek securities with higher expected rates of alpha decay.
Correct

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Question 4 of 4

Question 4
Q-Code: 21-L3-15-TSAE-76488
A portfolio manager’s goal is to transact close to current market prices to complete trade execution and realize as much potential alpha as possible. He is also looking to minimize trading costs. The price benchmark most likely used by him will be:
- A
  VWAP.
- B
  decision price.
- C
  arrival price.
Correct

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2022 L3 R25 Quiz1

2022 L3 R25 Quiz1

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