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// EXAM HALL21 QUESTIONS · 30 MINUTES

Product Controller Practice Test

What a desk made and why: explains and reserves, one day's result, and the calls when the trader says your number is wrong.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A product controller practice test asks whether you can explain what a desk made, and hold your ground with the person who made it. This paper has three parts: reserves, daily explains and the fair value hierarchy; one day's result, set on an exhibit, with an unexplained line, an illiquid mark and a day-one profit; and calls on traders, internal transfers, confirmations and sign-offs. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock, or take it as practice.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// HOW TO SIT IT

Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.

PART A

The daily work

The sums a controller does in their head, and what they check them against.

PART A · QUESTION 1

A bank's rates desk reports US$2.1m for the day. Market moves explain US$1.2m, the passing of time US$0.1m and new trades US$0.3m. The desk says: 'The rest is just noise.'

Signal or noise?

PART A · QUESTION 2

A desk holds US$40m of bonds marked at mid, and the bid is half a point lower.

About what would a reserve to the bid come to?

PART A · QUESTION 3

A trader bought a bond at 99 and has marked it at 99.5. The market has not moved, and nothing else has traded. They have booked US$100,000 of profit.

What do you ask?

PART A · QUESTION 4

A rates desk has a DV01 of US$50,000, long bonds. Yields fell 3 basis points today, and nothing else changed.

What should the explain show?

PART A · QUESTION 5

An FX desk is long EUR 10m. EUR/USD rises from 1.0800 to 1.0850.

What should the explain show?

PART A · QUESTION 6

A desk that sold options reports a small profit every quiet day, and calls it 'time decay'.

What do you check that against?

PART A · QUESTION 7

A position has no quoted market. It is valued on a model, using inputs that only the bank can see.

Where does that put it in the fair value hierarchy?

PART A · QUESTION 8

The risk system says a desk's position is US$120m. The trading system says US$100m.

What comes first?

PART B

The day's result

One morning, seven questions. Read the unexplained line and the price check first.

EXHIBIT AA · THE DAY'S RESULT

A product control pack, the morning after the last day of the month.

Rates desk, yesterday, US$000
US$000
Market moves410
Time passing90
New trades120
Unexplained380
The day1,000
Independent price check
DeskSource
Liquid bond, US$60m98.5098.45
Illiquid loan, US$40m96.0091.00

The source for the illiquid loan is one broker's quote, four weeks old. Three trades were amended after the close, all raising the desk's profit. On the structured desk, a new trade shows US$600,000 of profit on day one, and its value depends on a correlation nobody can observe. The FX desk has made between US$60,000 and US$65,000 in each of the last eleven months.

PART B · QUESTION 9

From Exhibit AA: the rates desk's result, and what the explain accounts for.

How much of the day's result is unexplained?

BACK TO EXHIBIT AA ↑
PART B · QUESTION 10

Exhibit AA's rates desk says: 'US$1m. Great day. The unexplained is just model noise.'

What do you check first?

BACK TO EXHIBIT AA ↑
PART B · QUESTION 11

In Exhibit AA, the desk marks the illiquid loan position at 96, and your source says 91, on US$40m.

What is the difference worth?

BACK TO EXHIBIT AA ↑
PART B · QUESTION 12

Exhibit AA's source for that loan is one broker's quote, four weeks old. The trader says: 'Your number is stale, and that broker does not know this name.'

How much weight does the trader's point carry?

BACK TO EXHIBIT AA ↑
PART B · QUESTION 13

In Exhibit AA, three trades were amended after the close on the last day of the month. All three raise the desk's profit.

Signal or noise?

BACK TO EXHIBIT AA ↑
PART B · QUESTION 14

In Exhibit AA, the structured trade shows US$600,000 profit on day one, and its value depends on a correlation nobody can observe in the market.

What do you do?

BACK TO EXHIBIT AA ↑
PART B · QUESTION 15

Exhibit AA's FX desk has made between US$60,000 and US$65,000 on every one of the last eleven months, in very different markets.

Signal or noise?

BACK TO EXHIBIT AA ↑

PART C

The calls

You sit between the desk and the ledger on purpose.

PART C · QUESTION 16

You are a product controller. Your independent price shows a desk's position US$800,000 lower than its mark. The trader calls: 'Your number is wrong. You do not understand this market.'

Your move?

PART C · QUESTION 17

A desk holds a private-company loan that has not traded in a year. At year-end you must value it, and the desk's model says par.

What do you do?

PART C · QUESTION 18

A desk asks to transfer a position to another desk in the bank, at a price the two desk heads have agreed between themselves.

What do you ask?

PART C · QUESTION 19

At 7pm, your manager asks you to sign the day's profit and loss for a desk. You have not finished the explain, and it does not yet reconcile.

What do you do?

PART C · QUESTION 20

A trader's largest positions are hedged by trades with a counterparty you have not heard of. The trades were entered by the trader, and nobody has seen a confirmation.

What do you do?

PART C · QUESTION 21

A head of desk says: 'You are costing me money with these reserves. Whose side are you on?'

What do you say?

0 OF 21 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE

// THE REST OF THE ROUND

Every question here is original; none is any bank's real test. Written for: Product controller.