Skip to content

NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management

In the context of a stock broker's risk management, what does the term 'exposure limit' for a client primarily refer to?

An exposure limit is the maximum value of trades or open positions a client is permitted to take, normally set in relation to the margin or collateral deposited with the broker, so that potential losses stay covered by the client's funds.

  1. AThe maximum value of trades a client may take, usually linked to margin or collateral depositedCorrect
  2. BThe minimum brokerage the client must pay each month
  3. CThe maximum number of demat accounts the client can hold
  4. DThe time limit within which the client must settle the contract note

Explanation

An exposure limit caps the trading position a client can take, and brokers generally link it to the margin or collateral the client has deposited. The other options describe brokerage, demat accounts and contract note timing, which have nothing to do with exposure.

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.

Practise Risk ManagementFree diagnostic mock

More Risk Management questions