Module: | MODULE B: RISK MANAGEMENT
Q358: Scenario: A junior forex dealer at PQR Bank reaches their cumulative daily stop-loss limit of ₹ 5 Lakhs by 1:00 PM due to extreme volatility in the GBP/INR currency pair.
Based on standard treasury risk control architecture, which of the following is the correct immediate protocol for this dealer?
✅ Correct Answer: B
The correct answer is B. A stop-loss limit is an absolute hard stop designed to prevent catastrophic capital erosion.
Once a dealer hits their cumulative daily stop-loss limit, mandatory risk protocols trigger immediately.
The dealer's authority to initiate any new risk-taking positions is suspended (terminal locked). To prevent further bleeding, all existing open positions managed by that dealer must be squared off immediately, or in some structures, transferred to a senior desk head for controlled liquidation.
Option A describes "revenge trading" or "doubling down," which is strictly prohibited.
Option C is incorrect because the stop-loss applies to the dealer's aggregate P&L, regardless of the currency pair.
Option D is incorrect; Mid-Office monitors limits but cannot arbitrarily reset them to allow more losses.
Once a dealer hits their cumulative daily stop-loss limit, mandatory risk protocols trigger immediately.
The dealer's authority to initiate any new risk-taking positions is suspended (terminal locked). To prevent further bleeding, all existing open positions managed by that dealer must be squared off immediately, or in some structures, transferred to a senior desk head for controlled liquidation.
Option A describes "revenge trading" or "doubling down," which is strictly prohibited.
Option C is incorrect because the stop-loss applies to the dealer's aggregate P&L, regardless of the currency pair.
Option D is incorrect; Mid-Office monitors limits but cannot arbitrarily reset them to allow more losses.