Click on the Detail Button to view the Formula Sheet. You are paying 5% per annum paid semi-annually and receiving 6-month LIBOR on a USD 10 million interest rate swap with exactly two years to maturity. 6month LIBOR for the next payment date is fixed today at 4.95%.How would you hedge the swap using FRAs? How to hedge an IRS with a strip of FRAs?
A. buy a strip of 0x6, 6x12, 12x18 and 18x24 FRAs
B. sell a strip of 0x6, 6x12, 12x18 and 18x24 FRAs
C. buy a strip of 6x12, 12x18 and 18x24 FRAs
D. sell a strip of 6x12, 12x18 and 18x24 FRAs
Click on the Detail Button to view the Formula Sheet. You are short of 6 Dec eurodollar futures contracts at
98.10. Yesterday, the closing price was 98.15. Todays closing price is 97.905. What variation margin will be due?
A. You will have to pay USD 612.50
B. You will receive USD 612.50
C. You will have to pay USD 3,675.00
D. You will receive USD 3,675.00
Click on the Detail Button to view the Formula Sheet. Which of the following is true?
A. The CME eurodollar futures contract has a tick value (for one full basis point equivalent) of USD25 and a face value of USD 1,000,000
B. The Euronext. LIFFE EURIBOR futures contract has a tick value (for one full basis point equivalent) of EUR25 and a face value of EUR 1,000,000
C. The Euronext. LIFFE CHF futures contract has a tick value (for one full basis point equivalent) of CHF25 and a face value of CHF 1,000,000
D. All of the above
Click on the Detail Button to view the Formula Sheet. A futures clearing house is:
A. The buyer to each seller and the seller to each buyer
B. A clearing agent only
C. The self-regulatory organisation for the futures exchange
D. The owner of the futures exchange
Click on the Detail Button to view the Formula Sheet. Basis risk on a futures contract is:
A. The risk of an adverse change in the futures price
B. The risk of an adverse change in the spread between futures and cash prices
C. The progressive illiquidity of a futures contract as it approaches expiry
D. The risk of a divergence between the futures price and the final fixing of the underlying interest rate
Click on the Detail Button to view the Formula Sheet. Voice-brokers in spot FX act as:
A. Proprietary traders
B. Market-makers
C. Matched principals
D. Agents
Click on the Detail Button to view the Formula Sheet. Automatic trading systems for interbank spot FX display the best prices entered into the systems by users and:
A. Display the names of those users along their prices
B. Offer pre-trade anonymity to users quoting prices
C. Offer pre and post-trade anonymity to users quoting prices
D. Offer users the choice of whether to remain anonymous
Click on the Detail Button to view the Formula Sheet. Are the forward points materially affected by changes in the spot rate?
A. never
B. Only for very large movements and longer terms
C. always
D. spot is the principal influence
Click on the Detail Button to view the Formula Sheet. A 12-month EUR/USD swap is quoted at 241/244. EUR interest rates are expected to fall, with USD interest rates (which are higher) remaining stable. Assuming no change in the spot rate what effect would you expect on the forward points?
A. Unchanged
B. Move towards 228/231
C. Move towards 257/260
D. Insufficient information
Click on the Detail Button to view the Formula Sheet. A 6-month SEK/NOK Swap is quoted 140/150. Spot is 0.9445. Which of the following statements is correct?
A. SEK interest rates are higher than NOK interest rates
B. NOK interest rates are higher than SEK interest rates
C. NOK interest rates are higher than USD interest rates
D. SEK interest rates and NOK interest rates are converging
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