NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
A broker's client bought shares worth Rs 10,00,000 on T day and the shares closed 4% lower the same day. The broker levies mark-to-market margin on the notional loss. What mark-to-market amount applies to this position?
The mark-to-market margin is Rs 40,000. The shares fell 4% on a Rs 10,00,000 purchase, giving a notional loss of 4% times Rs 10,00,000. This unrealised loss is what the margin is meant to cover until settlement.
- ARs 4,000
- BRs 40,000Correct
- CRs 4,00,000
- DRs 96,000
Explanation
Notional loss = 4% of Rs 10,00,000 = Rs 40,000. The mark-to-market margin is collected on this unrealised loss. Rs 96,000 is wrongly the remaining value less something, and Rs 4,000 uses 0.4%.
Did you get it right without looking?
One question tells you little. A timed set on Risk Management shows your real accuracy, how long you take and where you lose marks.
More Risk Management questions
- Under the SEBI framework on upfront collection of margins, which statement is correct for a client's purchase of shares in the cash market?
- A stock broker's client has a debit balance and no further margin on a day when the client's open futures position shows a mark-to-market lo…
- In the context of a stock broker's risk management, which of the following best describes 'margin' collected from clients?
- A client's margin shortfall arises during the trading day in the cash segment. Under exchange and SEBI norms, what is the consequence of a m…
- Under the SEBI framework for client securities, which practice is a stock broker required to follow regarding clients' fully paid securities…
- Which risk arises when a broker's client fails to pay for purchased securities or deliver sold securities by the pay-in deadline, leaving th…