CGFO-Debt Administration Exam
Questions and Answers Graded A+
Derivatives - Correct answer-Financial instrumenta whose value is based upon
(derived from) the value of another asset
Basis Risk - Correct answer-Risk that the value of future contract will not move
(mismatched) in line with that of the underlying asset
Term Mismatch Risk - Correct answer-Inability to find a suitable counterparty for a
swap transaction
Rollover Risk - Correct answer-The maturity of the derivatives is shorter than the
maturity of the hedgeable item
Counterparty (Credit) Risk - Correct answer-A risk to each party of a contract that
the counterparty will not fulfill its contractual obligation (ie cannot make future
payments or cannot make a termination payment)
Termination Risk - Correct answer-Possibility that the derivative may end before
maturity thus having to make a termination of the interest rate swap
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, Interest Rate Risk - Correct answer-Changes in the interest rate may reduce or
increase the market value of the asset.
Market-access Risk - Correct answer-The risk that the investor will be unable to
enter credit markets or that credit will become more costly
Types of derivative risks - Correct answer-Basis, term mismatch, rollover, interest
rate, counterparty, termination and market access
Municipal Bonds - Correct answer-Debt securities issued by states, cities, counties
and other governmental entities to finance primarily capital projects such as
buildings, highways and sewer.
Bank Notes - Correct answer-Direct loans by a banking institution.
Bonds that are taxable or tax exempt - Correct answer-Municipal bonds
Commercial Paper - Correct answer-Unsecured short term loan secured by the
borrower's financial health
Municipal Debt - Correct answer-Municipal bonds, bank notes, commercial paper,
leases, state revolving loan fund program
Certificates of Participation (COP) - Correct answer-Allows an investor to buy a
share of the improvements or infrastructure the government intends to fund. Does
not require a vote of citizens
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
Questions and Answers Graded A+
Derivatives - Correct answer-Financial instrumenta whose value is based upon
(derived from) the value of another asset
Basis Risk - Correct answer-Risk that the value of future contract will not move
(mismatched) in line with that of the underlying asset
Term Mismatch Risk - Correct answer-Inability to find a suitable counterparty for a
swap transaction
Rollover Risk - Correct answer-The maturity of the derivatives is shorter than the
maturity of the hedgeable item
Counterparty (Credit) Risk - Correct answer-A risk to each party of a contract that
the counterparty will not fulfill its contractual obligation (ie cannot make future
payments or cannot make a termination payment)
Termination Risk - Correct answer-Possibility that the derivative may end before
maturity thus having to make a termination of the interest rate swap
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Interest Rate Risk - Correct answer-Changes in the interest rate may reduce or
increase the market value of the asset.
Market-access Risk - Correct answer-The risk that the investor will be unable to
enter credit markets or that credit will become more costly
Types of derivative risks - Correct answer-Basis, term mismatch, rollover, interest
rate, counterparty, termination and market access
Municipal Bonds - Correct answer-Debt securities issued by states, cities, counties
and other governmental entities to finance primarily capital projects such as
buildings, highways and sewer.
Bank Notes - Correct answer-Direct loans by a banking institution.
Bonds that are taxable or tax exempt - Correct answer-Municipal bonds
Commercial Paper - Correct answer-Unsecured short term loan secured by the
borrower's financial health
Municipal Debt - Correct answer-Municipal bonds, bank notes, commercial paper,
leases, state revolving loan fund program
Certificates of Participation (COP) - Correct answer-Allows an investor to buy a
share of the improvements or infrastructure the government intends to fund. Does
not require a vote of citizens
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
