Saudi CME-1A Scenario Practice Guide
Apply a repeatable method to CME-1A questions on institutions, economics, securities, transactions, derivatives, funds, ethics, products, and advice.
Six-step decision method
flowchart LR
A[Identify the actor or client] --> B[Classify the instrument or service]
B --> C[Locate the market or process stage]
C --> D[Extract the controlling facts]
D --> E[Apply the principle or calculation]
E --> F[Choose the supported action or consequence]
1. Identify the actor or client
Bank, issuer, investor, borrower, intermediary, fund manager, custodian, adviser, regulator, and central-bank roles are not interchangeable.
2. Classify the instrument or service
Decide whether the facts concern equity, debt, a money-market instrument, foreign exchange, a derivative, a fund, insurance, a pension, a mortgage, execution, custody, or advice.
3. Locate the market or process stage
Issuance, trading, clearing, settlement, custody, valuation, distribution, recommendation, implementation, and review create different risks and responsibilities.
4. Extract the controlling facts
Keep ownership, cash flow, maturity, security, market, currency, liquidity, leverage, counterparty, client objective, time horizon, and risk facts. Ignore ornamental detail.
5. Apply the principle or calculation
Use the narrow concept supported by the facts. Estimate direction before calculating, and check whether the result is a price, yield, return, exposure, value, or risk measure.
6. Choose the supported action or consequence
The best option should fit the actor, instrument, stage, and evidence without assuming an unstated guarantee, authority, client fact, or market condition.
Common scenario families
| Scenario | First classification | Decisive evidence |
|---|---|---|
| An institution offers a service | Institution and function | Deposit taking, lending, underwriting, trading, custody, payment, advice, or monetary-policy role |
| An economic variable changes | Transmission path | Direction of rate, inflation, growth, currency, borrower, saver, company, and asset-price effects |
| A company raises or alters capital | Equity or debt event | Ownership or creditor claim, issue route, cash flow, priority, maturity, and corporate action |
| A security is bought or sold | Market and transaction stage | Primary or secondary market, venue, execution, clearing, settlement, custody, and counterparty |
| A derivative is used | Exposure and purpose | Underlying, right or obligation, standardization, counterparty, hedge, speculation, and payoff |
| An investor selects a fund | Structure and fit | Open or closed structure, pricing, liquidity, manager, assets, charges, risk, and objective |
| A conduct issue arises | Actor and principle | Integrity, competence, client interests, conflict, disclosure, market conduct, and evidence |
| A client seeks a recommendation | Advice stage | Objective, horizon, liquidity, risk tolerance, capacity, product knowledge, suitability, and review |
Handling close answer choices
- Prefer the option that answers the exact decision asked.
- Prefer the consequence assigned to the correct actor and process stage.
- Reject an option that changes an unstated client fact or guarantee.
- Separate product suitability from product performance.
- Separate market risk, credit risk, liquidity risk, operational risk, and counterparty risk.
- Check whether the question asks for purpose, feature, calculation, risk, or next action.
Use the cheat sheet while learning the method, then remove it and repeat with unseen questions.