CAIIB · Bank Financial Management · Module C — Treasury Management
CAIIB BFM Unit 23 — Treasury Risk Management: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper II of the December 2026 cycle (Saturday 12 December 2026)
This is the free practice page for CAIIB BFM Unit 23 — Treasury Risk Management (Module C — Treasury Management). The CAIIB Mock Centre holds 184 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
BFM · Module C184 MCQs in the Mock Centre5 free belowPaper on 12 December
Key facts examiners test from this unit
Treasury risk and organisational controls — treasury runs market risk with high leverage, large deals and fast, irrevocable losses, so it is controlled first by separating the front, back and mid offices.
Position, gap and stop-loss limits — dealers work within deal-size, open position (daylight and smaller overnight) and stop-loss limits, all in absolute amounts; forward gaps are capped by gap limits and the AGL.
Value at risk and yield to maturity — VaR is the loss not exceeded over a period at a confidence level in normal markets; YTM is a bond's internal rate of return at its market price.
Changed since the textbook
EU timetable for Basel market risk rules (4 Jun 2026). The European Commission adopted temporary adjustments on 4 June 2026: the revised Basel market risk framework (FRTB) applies in the EU from 1 January 2027, with a multiplier offsetting its capital impact for three years, to the end of 2029. Source: European Commission
Investment Fluctuation Reserve discontinued (18 May 2026). RBI discontinued the mandatory Investment Fluctuation Reserve from 18 May 2026; balances as on 17 May 2026 move to the statutory reserve, general reserve or the P&L balance and count as Tier 1 capital. Source: KNN India
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 184 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
What valuation role does FIMMDA still play?
Why (a): Under the Investment Directions, FIMMDA's spreads are used to value unquoted debt securities. (b) is wrong: FBIL publishes the reference rate. (c) is wrong: RBI's Monetary Policy Committee sets the repo rate. (d) is wrong: FBIL publishes G-sec and T-bill prices.
Question 2 of 5
What do daylight limits cover?
Why (c): 23.1.2: daylight limits apply to intraday positions. (a) is wrong: A position held over a weekend is an overnight position. (b) is wrong: "daylight" refers to the trading day, not to clock changes. (d) is wrong: Forward positions are measured by gaps.
Question 3 of 5
How often must forex trading positions be marked to market for applying stop-loss limits?
Why (b): 23.1.2 says forex trading positions need to be valued daily for this purpose. (a) is wrong: A monthly valuation would let losses build up. (c) is wrong: Quarterly is far too slow for stop-losses. (d) is wrong: The limits must be applied while positions are open.
Question 4 of 5
In the historical approach, why may progressive weights be given to the data?
Why (c): 23.3.1 says recent information has greater impact, so it may get more weight. (a) is wrong: It reverses the reason. (b) is wrong: The textbook mentions no such rule. (d) is wrong: The historical approach uses a series of data, such as 90 days.
Question 5 of 5
In calculating duration, the weighted times are added up and divided by the total of the weights. What is that total?
Why (d): 23.3.2: the total of the weights is the total PV of the cash flows, which is also the bond's market price. (a) is wrong: The face value is not discounted. (b) is wrong: The coupons alone leave out the principal and are not discounted. (c) is wrong: Maturity is a time, not a weight.
0 of 5 answered.
Traps in this unit
Back office reports to the Operations Head, not the Treasury Head.
Front and back office must be totally segregated.
Overnight limits are smaller than daylight ones.
Practise all 184 questions on Unit 23. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the BFM Online Mock Centre unlocks all 7,600+ BFM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.