Exam identity and high-yield focus
Use this Quick Reference as independent review support for the Canadian Investment Regulatory Organization CIRO Institutional Securities Exam. The official exam title is CIRO Institutional Securities Exam and the exam code is Institutional Securities Exam.
The exam is best approached as an applied institutional-dealer exam: connect products, trading practices, client obligations, market conduct, and risk. Expect scenarios where the technically correct answer depends on the role of the dealer, the type of client, the product, the order handling facts, and whether information is public or material non-public information.
Core decision map
| If the scenario is about… | First identify… | Then apply… | Common trap |
|---|
| Institutional client recommendation | Advisory, managed, execution-only, or unsolicited? | KYC/KYP, suitability, conflicts, documentation | Assuming institutional client means no obligations |
| Trade execution | Agency or principal? Client order or inventory trade? | Best execution, fair pricing, priority, disclosure | Confusing best price with best execution |
| Block trade | Who participated, when allocated, basis of allocation | Fair allocation, average pricing, client priority | Allocating profitable fills after the fact |
| New issue | Prospectus, exemption, underwriting type, allocation | Due diligence, conflicts, selling restrictions | Treating private placement as unregulated |
| Research or banking conflict | Public info or MNPI? Restricted/watch list? | Information barriers, supervision, disclosure | Believing “rumour” can be freely traded |
| Fixed income question | Coupon, yield, term, credit, call features | Price/yield inverse, duration, spread analysis | Ignoring embedded options |
| Derivatives question | Directional view or hedge objective | Payoff, margin/collateral, counterparty risk | Mixing buyer and seller obligations |
| Portfolio/risk question | Absolute return, benchmark-relative, liability-driven | Beta, duration, tracking error, VaR limits | Treating VaR as maximum possible loss |
Regulatory and conduct reference
Rule sources to keep separate
| Source / concept | Exam use | Key distinction |
|---|
| CIRO rules | Dealer-member conduct, supervision, account handling, registration, conflicts, sales practices | Dealer obligations are broader than securities product knowledge |
| Universal Market Integrity Rules (UMIR) | Trading conduct on Canadian marketplaces | Focus on fair, orderly markets and prohibited trading practices |
| Canadian securities legislation | Prospectus rules, exemptions, insider trading, market abuse, disclosure | Applies beyond CIRO membership |
| Dealer policies and procedures | Practical implementation of rules | A written policy does not excuse non-compliance |
| Client agreements and mandates | Defines authority, objectives, restrictions | Must align with actual account handling |
Conduct principles
| Principle | Practical exam meaning | Red flags |
|---|
| Fair dealing | Act honestly, fairly, and in good faith with clients | Misleading yield, hidden conflict, selective disclosure |
| Know your client | Understand client identity, authority, objectives, constraints, risk profile | Trading outside mandate, undocumented strategy changes |
| Know your product | Understand product structure, risks, costs, liquidity, conflicts | Recommending complex product based only on headline yield |
| Suitability / appropriateness | Match recommendation or action to client facts and mandate | “Institutional” used as a shortcut answer |
| Conflict management | Identify, avoid or control, and disclose material conflicts | Dealer inventory, underwriting role, compensation bias |
| Supervision | Policies, approvals, exception review, escalation | Unsupported discretionary trading, unreviewed outside activities |
| Market integrity | No manipulation, deception, insider trading, front-running | Trading ahead, layering/spoofing, wash trades |
| Confidentiality | Protect client and issuer information | Sharing block order interest or MNPI |
Institutional clients and account context
Client and role distinctions
| Term | Meaning in exam scenarios | Do not confuse with… |
|---|
| Institutional client | Typically a sophisticated organization such as pension plan, fund, insurer, bank, investment manager, government entity, corporation, or hedge fund | Automatic waiver of all dealer obligations |
| Permitted / accredited concepts | Securities-law categories relevant to exemptions and client classification | CIRO account handling duties |
| Investment manager | Makes investment decisions for underlying accounts or funds | Custodian or executing broker |
| Fiduciary client | Acts for beneficiaries or plan members | Proprietary corporate treasury account |
| Execution-only relationship | Client directs trades without recommendation | Permission for dealer to ignore order handling duties |
| Advisory relationship | Dealer or representative recommends | Managed account authority |
| Managed / discretionary account | Dealer has authority to make trades without prior client approval within mandate | Occasional client consent |
| Principal trade | Dealer sells from or buys into its own inventory | Agency trade for commission |
| Agency trade | Dealer acts as agent and seeks execution for client | Riskless principal without disclosure issues |
KYC, KYP, suitability, and documentation
| Obligation | What to gather or assess | Institutional exam angle |
|---|
| Identity and authority | Legal name, authorized traders, beneficial ownership/control where applicable | Confirm who can place orders and bind the client |
| Investment objectives | Income, growth, liquidity, hedging, liability matching, benchmark management | Objectives often tied to mandate, IPS, or treasury policy |
| Risk tolerance / capacity | Market, credit, liquidity, leverage, derivatives, concentration | Capacity may be high but mandate may still be restrictive |
| Time horizon | Cash need, liability schedule, fund strategy, lockups | Short horizon conflicts with illiquid or long-duration products |
| Product understanding | Complexity, valuation, liquidity, leverage, payoff | Complex products require product-specific review |
| Constraints | Legal, tax, ESG, ratings, issuer, duration, currency, sector, concentration limits | A trade can be attractive but prohibited by mandate |
| Recommendation basis | Why product/strategy fits facts | “Higher yield” alone is weak support |
| Changes and exceptions | Material change to client facts or mandate | Update file and reassess before acting |
High-yield rule: institutional sophistication may affect the depth and manner of analysis, but it does not eliminate obligations around fair dealing, conflicts, accurate disclosure, order handling, and market integrity.
Trading, execution, and market conduct
Order handling matrix
| Topic | Correct exam approach | Watch for |
|---|
| Best execution | Consider price, speed, certainty, liquidity, order size, market conditions, total transaction cost | Not always the lowest visible price |
| Client priority | Client orders should not be disadvantaged by dealer or representative trading | Trading for firm/personal account first |
| Time priority | Earlier comparable orders generally receive priority under applicable policies and market rules | Reordering fills to favour one client |
| Block orders | Pre-define participation/allocation method where practical; allocate fairly | Cherry-picking profitable allocations |
| Average price | Used to allocate executions fairly among participants | Must be supportable by order records |
| Principal trading | Disclose or manage capacity, pricing, markups/markdowns, conflicts | Treating inventory sale as neutral advice |
| Trade corrections | Correct genuine error with documentation and supervision | Moving losses to error account improperly |
| Order changes | Record changes, cancellations, client instructions | Altering order terms after execution |
| Discretionary action | Requires proper authority and supervision | “Could not reach client” is not blanket authority |
Market integrity red flags
| Red flag | What it suggests | Exam response |
|---|
| Trading before a large client order | Front-running / misuse of order information | Prohibited; escalate and supervise |
| Entering orders to create false appearance | Manipulation, layering, spoofing, artificial price | Prohibited trading practice |
| Matched orders with no real ownership change | Wash trading / deceptive activity | Prohibited |
| Trading while aware of MNPI | Insider trading concern | Do not trade; restrict information flow |
| Passing issuer information to selected clients | Tipping / selective disclosure | Escalate; no trading on MNPI |
| Marking close or influencing benchmark price | Manipulative benchmark or closing-price activity | Prohibited unless legitimate and documented |
| Rumour-based trading with confirmation from insider | MNPI risk | Treat as material non-public until resolved |
| Research changed before public release | Information barrier issue | Restrict trading and dissemination as required |
Settlement and trade lifecycle
| Stage | What matters | Exam trap |
|---|
| Order entry | Client authority, order terms, account restrictions | Wrong account or unauthorized trader |
| Execution | Marketplace, price, capacity, timestamp, liquidity | Best execution reduced to price only |
| Allocation | Participating accounts, method, average price | After-the-fact allocation bias |
| Confirmation | Trade terms, capacity, product, settlement information | Inaccurate yield or fee disclosure |
| Clearing and settlement | Delivery-versus-payment, receipt-versus-payment, custodian instructions | Assuming all products share one settlement cycle |
| Fails and breaks | Identify cause, communicate, resolve, supervise | Ignoring repeated fails as operational only |
| Records | Order tickets, communications, approvals, exception notes | Unsupported verbal instruction |
For settlement-cycle questions, use the cycle stated in the question or current course material. Do not apply one settlement convention to every product.
MNPI and restricted activity
| Concept | Quick test | Correct handling |
|---|
| Material information | Would a reasonable investor expect it to affect price or investment decision? | Treat carefully; assess before use |
| Non-public information | Has it been broadly disseminated and absorbed by market? | Do not trade or tip |
| Insider trading | Trading while in possession of MNPI | Prohibited |
| Tipping | Informing another person of MNPI outside proper business need | Prohibited |
| Wall-crossing | Receiving confidential deal information with restrictions | Follow wall-crossing procedures |
| Watch list | Internal monitoring of sensitive issuer/activity | Confidential; not necessarily trading ban |
| Restricted list | Trading/research restrictions for specific names | Follow stated restrictions |
| Mosaic theory | Combining public and non-material non-public information | Not a defence for trading on MNPI |
Conflicts table
| Conflict | Why it matters | Good control |
|---|
| Dealer inventory | Dealer benefits from selling position | Capacity disclosure, fair pricing, suitability review |
| Underwriting relationship | Dealer wants distribution success | Disclosure, allocation controls, research separation |
| Research vs banking | Analyst independence risk | Information barriers, disclosure, supervision |
| Gifts/entertainment | Influence over routing or allocation | Limits, approval, records |
| Personal trading | Representative benefits before clients | Pre-clearance, restricted lists, client priority |
| Soft dollars / client brokerage | Brokerage used for research or execution services | Client benefit, disclosure, policy controls |
| Referral arrangements | Compensation for directing client | Disclosure and approval |
| Outside activities | Divided loyalty or undisclosed compensation | Pre-approval and supervision |
Product reference: fixed income and money market
Fixed income fundamentals
| Factor | Price impact when factor rises | Notes |
|---|
| Market yield | Price falls | Core inverse relationship |
| Coupon rate | Less price volatility if higher, all else equal | More cash flow received earlier |
| Term to maturity | More volatility if longer, all else equal | Longer duration |
| Credit spread | Price falls when spread widens | Reflects higher required compensation |
| Liquidity premium | Price falls if liquidity worsens | Wide bid-ask in stressed markets |
| Call risk | Limits upside when rates fall | Issuer likely calls high-coupon debt |
| Put feature | Supports price when rates rise or credit weakens | Investor has exit option |
| Convertibility | Adds equity-linked upside | Valuation depends on stock and bond floor |
Bond and money market instruments
| Instrument | Main use | Key risks |
|---|
| Government bonds | Benchmark rates, safety, duration exposure | Interest-rate risk, inflation risk |
| Provincial / municipal debt | Yield pickup versus federal debt | Credit spread, liquidity |
| Corporate bonds | Income and credit exposure | Credit downgrade/default, spread widening |
| Debentures | Unsecured issuer obligation | Recovery risk |
| Mortgage-backed securities | Mortgage cash-flow exposure | Prepayment and extension risk |
| Asset-backed securities | Pool of receivables or loans | Structure, collateral, liquidity |
| Banker’s acceptances | Short-term bank-backed money market | Bank credit, rollover |
| Commercial paper | Short-term corporate funding | Issuer credit, liquidity |
| Treasury bills | Short-term government discount instrument | Reinvestment risk, quoted-yield convention |
| Repo | Secured financing using securities collateral | Counterparty, collateral, haircut, margining |
| Securities lending | Borrow securities, often to support short sales | Recall, collateral, operational risk |
Yield curve and rate views
| View / condition | Likely strategy | Risk if wrong |
|---|
| Rates expected to fall | Extend duration, buy longer bonds, receive fixed in swaps | Loss if rates rise |
| Rates expected to rise | Shorten duration, floating-rate notes, pay fixed in swaps for floating debt hedge | Opportunity cost if rates fall |
| Curve steepening | Position long/short maturities based on expected segment moves | Non-parallel shifts |
| Curve flattening | Reduce exposure to segment expected to cheapen | Curve may twist differently |
| Credit spreads tightening | Add credit exposure | Credit shock widens spreads |
| Credit spreads widening | Upgrade quality, reduce lower-rated exposure | Forgone yield if spreads tighten |
| Inflation rising | Shorten duration, consider inflation-linked or real-asset exposure | Real yield changes still matter |
Product reference: equities, funds, and structured exposure
Equity securities
| Security / feature | Holder position | Exam angle |
|---|
| Common shares | Residual ownership, voting rights, dividends if declared | Highest residual risk and upside |
| Preferred shares | Priority over common for dividends/assets, often fixed dividend | Rate sensitivity plus credit risk |
| Cumulative preferred | Missed dividends accrue before common dividends | Better income protection |
| Non-cumulative preferred | Missed dividends do not accrue | Higher dividend uncertainty |
| Retractable preferred | Holder can require redemption on terms | Supports price |
| Callable preferred | Issuer can redeem | Caps upside when rates fall |
| Convertible preferred/debt | Can convert into common shares | Bond/preferred floor plus equity option |
| Rights | Short-term privilege to buy new shares | Dilution and theoretical value |
| Warrants | Longer-term option-like right to buy shares | Leverage, time value, expiry risk |
| ETFs | Exchange-traded basket exposure | Market price vs NAV, liquidity, tracking error |
| Closed-end funds | Fixed share count, exchange traded | Premium/discount to NAV |
| Structured notes | Debt plus embedded derivative payoff | Credit of issuer, payoff formula, liquidity |
Equity analysis ratios
| Ratio | Plain formula | Interpretation |
|---|
| Earnings per share | Net income available to common / weighted average common shares | Profit per share |
| Price/earnings | Market price / EPS | Higher may imply growth expectations or overvaluation |
| Dividend yield | Annual dividend / market price | Cash return based on price |
| Payout ratio | Dividends / earnings | Sustainability indicator |
| Book value per share | Common equity / common shares | Accounting net asset measure |
| Return on equity | Net income / average equity | Profitability relative to capital |
| Debt-to-equity | Total debt / equity | Financial leverage |
| Current ratio | Current assets / current liabilities | Short-term liquidity |
Rights valuation quick rules
If N rights are required to buy one new share at subscription price S and the market price is M:
| Situation | Plain formula | Use |
|---|
| Cum-rights value of one right | (M - S) / (N + 1) | Before shares trade ex-rights |
| Ex-rights value of one right | (M - S) / N | After shares trade ex-rights |
| No theoretical value | If M is less than or equal to S | Right is out of the money |
Product reference: derivatives and hedging
Options
| Position | Market view / purpose | Maximum loss | Maximum gain |
|---|
| Long call | Bullish, leveraged upside | Premium | Unlimited in theory |
| Short call | Neutral/bearish income | Unlimited in theory | Premium |
| Long put | Bearish or hedge long asset | Premium | Strike less premium, if asset goes to zero |
| Short put | Neutral/bullish income; willingness to buy | Strike less premium | Premium |
| Covered call | Long stock plus short call | Stock downside less premium | Limited above strike |
| Protective put | Long stock plus long put | Limited below strike, net of premium | Upside less premium |
| Collar | Long stock, long put, short call | Downside limited | Upside capped |
| Straddle | Long call and put same strike | Premiums | Large move either direction |
| Spread | Buy one option, sell another | Defined by structure | Defined by structure |
Option Greeks
| Greek | Measures | Long option exposure |
|---|
| Delta | Price sensitivity to underlying | Calls positive, puts negative |
| Gamma | Sensitivity of delta to underlying changes | Positive for long options |
| Vega | Sensitivity to implied volatility | Positive for long options |
| Theta | Time decay | Usually negative for long options |
| Rho | Sensitivity to interest rates | Calls generally positive, puts generally negative |
Futures, forwards, swaps, and credit derivatives
| Instrument | Core feature | Typical institutional use | Main risks |
|---|
| Futures | Standardized exchange-traded forward commitment | Hedge equity index, rates, commodities, FX | Basis, margin, liquidity |
| Forwards | Customized OTC commitment | Tailored FX, rate, commodity hedge | Counterparty, liquidity |
| Interest-rate swap | Exchange fixed and floating cash flows | Convert fixed/floating exposure | Counterparty, valuation, basis |
| Currency swap | Exchange interest/principal in different currencies | Long-term FX funding hedge | FX, counterparty |
| Total return swap | Exchange total return of asset for financing leg | Synthetic exposure or financing | Counterparty, collateral |
| Credit default swap | Protection buyer pays premium for credit protection | Hedge or take credit spread view | Counterparty, credit event terms |
| Equity swap | Exchange equity return for another return stream | Synthetic equity or benchmark exposure | Counterparty, collateral |
Hedge direction shortcuts
| Exposure | Concern | Hedge |
|---|
| Long equity portfolio | Market decline | Sell index futures, buy puts, collar |
| Short equity position | Market rise | Buy calls or buy index futures if broad exposure |
| Floating-rate borrower | Rates rise | Pay fixed / receive floating swap |
| Fixed-rate borrower | Rates fall and wants floating benefit | Receive fixed / pay floating swap |
| Bond portfolio | Yields rise | Short bond futures or reduce duration |
| Future foreign currency receipt | Domestic currency strengthens | Sell foreign currency forward |
| Future foreign currency payment | Domestic currency weakens | Buy foreign currency forward |
| Credit exposure to issuer | Credit worsens | Buy CDS protection |
Time value, bonds, and duration
\[
\text{Bond price}=\sum_{t=1}^{n}\frac{C_t}{(1+y)^t}+\frac{F}{(1+y)^n}
\]\[
\text{Approximate bond price change} \approx -D_{\text{mod}}\Delta y+\frac{1}{2}C_{\text{vx}}(\Delta y)^2
\]
| Formula | Plain version | Use |
|---|
| Current yield | annual coupon / market price | Income-only yield approximation |
| Approximate YTM | [coupon + (face - price) / years] / [(face + price) / 2] | Fast estimate for straight bond |
| Modified duration | Macaulay duration / (1 + yield per period) | Interest-rate sensitivity |
| Dollar duration | modified duration x market value | Dollar price sensitivity |
| DV01 | modified duration x price x 0.0001 | Price change for 1 bp yield move |
| Accrued interest | coupon payment x days since last coupon / days in coupon period | Clean vs dirty price |
| Spread | risky yield - benchmark yield | Credit/liquidity compensation |
\[
E(R_i)=R_f+\beta_i\left(E(R_m)-R_f\right)
\]
| Formula | Plain version | Use |
|---|
| Holding-period return | (ending value - beginning value + income) / beginning value | Total return |
| Expected portfolio return | sum of weight x expected return | Weighted-average return |
| Beta | covariance with market / market variance | Systematic risk |
| Alpha | actual or expected return - CAPM required return | Value added versus systematic risk |
| Sharpe ratio | portfolio excess return / standard deviation | Total risk-adjusted return |
| Treynor ratio | portfolio excess return / beta | Systematic risk-adjusted return |
| Information ratio | active return / tracking error | Benchmark-relative skill |
| Tracking error | standard deviation of active return | Active risk |
| Debt-to-equity | total debt / shareholders’ equity | Leverage |
| Interest coverage | EBIT / interest expense | Ability to service debt |
Options and forwards
\[
C+PV(K)=P+S_0
\]
| Formula | Plain version | Use |
|---|
| Call intrinsic value | max(0, stock price - strike) | Moneyness |
| Put intrinsic value | max(0, strike - stock price) | Moneyness |
| Option premium | intrinsic value + time value | Premium decomposition |
| Forward price, no income | spot x (1 + financing cost over term) | Basic carry model |
| Futures hedge ratio | exposure value / futures contract value | Approximate number of contracts |
| Beta-adjusted equity hedge | portfolio beta x portfolio value / futures contract value | Index futures hedge |
| Duration-adjusted bond hedge | portfolio value x portfolio duration / futures value x futures duration | Interest-rate hedge |
Corporate finance and new issues
Offering methods
| Method | Dealer role | Issuer certainty | Exam angle |
|---|
| Firm commitment underwriting | Dealer buys issue and resells | Higher | Dealer has inventory/distribution risk |
| Bought deal | Dealer commits before broad marketing | High | Speed plus underwriting risk |
| Best efforts | Dealer acts as agent to sell | Lower | Unsold securities remain issuer risk |
| Agency private placement | Dealer places with eligible investors | Depends on demand | Exemption and suitability still matter |
| Shelf prospectus / takedown | Issuer pre-qualifies securities for later sale | Flexible | Watch disclosure and market timing |
| Secondary offering | Existing holder sells securities | No new issuer capital unless treasury portion | Overhang and insider/control issues |
New issue workflow
| Step | What to review | Risk point |
|---|
| Mandate | Issuer objective, financing need, dealer role | Conflict and capacity |
| Due diligence | Business, financials, risks, disclosure | Inadequate verification |
| Documentation | Prospectus, offering document, subscription documents | Misstatement or omission |
| Marketing | Roadshow, term sheet, research restrictions | Selective disclosure |
| Book-building | Demand, price sensitivity, investor quality | Inflated or misleading demand |
| Pricing | Market conditions, comparables, issuer needs | Unfair pricing or conflict |
| Allocation | Fair process, suitability, restrictions | Favouritism or quid pro quo |
| Closing | Settlement, delivery, funds, confirmations | Failed conditions or documentation gaps |
| Aftermarket | Stabilization if permitted, research, surveillance | Manipulation or conflict |
Portfolio, risk, and institutional strategy
Risk types
| Risk | Definition | Institutional control |
|---|
| Market risk | Loss from price, rate, spread, FX, volatility changes | Limits, hedges, stress tests |
| Credit risk | Counterparty or issuer fails or deteriorates | Ratings, spreads, exposure limits, collateral |
| Liquidity risk | Cannot trade without material price impact | Position limits, liquidity buckets |
| Operational risk | Process, systems, people, settlement failures | Controls, reconciliations, supervision |
| Counterparty risk | OTC or financing counterparty defaults | ISDA/CSA, collateral, netting |
| Basis risk | Hedge and exposure do not move identically | Better hedge design, monitoring |
| Model risk | Valuation or risk model is wrong | Validation, independent pricing |
| Concentration risk | Too much exposure to issuer, sector, factor, strategy | Diversification limits |
| Reinvestment risk | Cash flows reinvested at lower rates | Laddering, immunization |
| Currency risk | FX movement changes domestic value | Forwards, options, natural hedges |
Institutional strategy selection
| Objective | Product / strategy | Key suitability question |
|---|
| Match liabilities | Bonds, duration matching, immunization | Do cash flows and duration align with liabilities? |
| Increase income | Credit, preferreds, structured notes, covered calls | Is extra yield compensation for hidden risk? |
| Reduce equity beta | Index futures, options, low-beta allocation | Is hedge size and benchmark appropriate? |
| Maintain liquidity | T-bills, money market, high-quality short bonds | Are instruments liquid under stress? |
| Currency hedge | FX forwards/options, natural hedges | Hedge ratio, term, and accounting impact? |
| Tactical rate view | Duration shift, curve trade, swaps | Is view expressed with controlled downside? |
| Credit view | Corporate bonds, CDS, long/short credit | Is liquidity and default risk understood? |
| Volatility view | Options, variance-like structures | Is premium decay and gap risk acceptable? |
VaR and stress testing
| Tool | What it says | Limitation |
|---|
| Value at Risk | Estimated loss threshold over a horizon at a confidence level | Not the maximum loss |
| Stress test | Loss under specified extreme scenario | Scenario may not occur or may miss actual shock |
| Scenario analysis | Impact of macro or market path | Depends on assumptions |
| Sensitivity | Impact of one factor change | Ignores interactions unless modeled |
| Backtesting | Compare model forecasts with actual outcomes | Historical fit does not ensure future accuracy |
Applied exam traps
| Trap | Better reasoning |
|---|
| “Institutional client” means suitability never matters | Determine relationship, mandate, recommendation, waiver/acknowledgement, and dealer role |
| Highest yield is the best recommendation | Analyze credit, duration, liquidity, call risk, tax, mandate, and concentration |
| Best execution means best quoted price | Consider full execution quality and order circumstances |
| Public rumour is safe to trade | Ask whether information is material, non-public, or confirmed by an insider |
| Dealer can allocate after knowing which accounts profited | Allocation must be fair and supportable, not outcome-based |
| A hedge must eliminate all risk | Most hedges reduce selected risk and introduce basis/cost/counterparty risk |
| Long calls and short puts have the same risk | Both bullish, but short put has substantial downside obligation |
| Duration predicts exact bond price change | Duration is approximation; convexity and large rate moves matter |
| Callable bond benefits equally from rate declines | Call option caps upside |
| VaR is worst-case loss | VaR is a model estimate at a confidence level, not a loss ceiling |
| Principal trade is automatically unsuitable | It may be suitable, but capacity, price, conflict, and disclosure matter |
| Private placement means no disclosure concern | Exempt distribution still requires accurate information and proper client handling |
Final review checklist
Before practice questions, be able to answer these quickly:
- Identify dealer capacity: agency, principal, advisory, managed, underwriting, market-making.
- Separate KYC, KYP, suitability, conflicts, and best execution.
- Explain why yield rises when bond price falls.
- Rank bond price sensitivity by duration, coupon, maturity, and embedded options.
- Choose correct hedge direction for equity, rates, credit, and FX exposures.
- Recognize MNPI, tipping, front-running, manipulation, and allocation abuse.
- Distinguish public offering, private placement, firm commitment, best efforts, and bought deal.
- Calculate core ratios: current yield, approximate YTM, duration price effect, EPS, P/E, dividend yield, Sharpe, alpha, and option intrinsic value.
- Know the risk hidden behind attractive yield: credit, liquidity, leverage, call, currency, structure, or counterparty risk.
- Use the facts in the question; do not assume all institutional accounts are identical.
Practical next step
Use this Quick Reference to diagnose weak areas, then move directly into timed, scenario-based practice. For each missed question, write the rule, the product feature, and the decision point that changed the answer.