(a) dealer SwapBank are engaged in three transactions with each other. From SwapBank's perspective, the market value is as follows: Company A and Swap: RM3,000,000 Forward: +RM2,500,00O Option: - RM1,500,000 Explain the consequences to SwapBank if Company A defaults with and without closeout netting respectively.

(a) dealer SwapBank are engaged in three transactions with each other. From SwapBank's perspective, the market value is as follows: Company A and Swap: RM3,000,000 Forward: +RM2,500,00O Option: - RM1,500,000 Explain the consequences to SwapBank if Company A defaults with and without closeout netting respectively.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Below is a chart with profit/loss on the vertical axis, and the $/£ exchange rate on the horizontal axis. The solid line shows the profit/loss schedule for a: Question 8 options: put option in isolation (e.g. used for speculating that the pound will depreciate) None of the above covered call option (a call option is used as a hedge) covered put option (a put option is used as a hedge)
Which of the following statements about interest rate swaps is/are true? I - The notional principals are exchanged by the counterparties at the end of an interest rate swap's life II - The differences in how credit risk is priced gives rise to comparative advantage in borrowing through swaps. III - When an intermediary is involved in a swap, the intermediary assumes no counterparty risk for either end of the transaction IV - It is possible for both counterparties to benefit from a swap even if one counterparty has the absolute advantage in all types of borrowing O a. I, II, III, and IV O b. II and IV O c. II, III, and IV O d. I, II, and IV Oe. II and III
a)explain the structure of a pay-fixed, receive-fixed currency swap, and describe the cash flows at its initiation date, settlement dates, and termination date. b)explain how to determine the notional amounts in two currencies in a currency swap. c)explain the equivalency between a currency swap and a pair of bond transactions in different currencies. d)describe the four types of currency swaps. e)describe the relationship between currency swaps and interest rate swaps.
All of the following are credit derivatives except: Group of answer choices C. Spread options D. Credit-linked notes B. Credit default swaps (CDS) A. Remics
Please oll option information and correct answer
Assume you are lending money to company X. A credit default swap (CDS) consists of an agreement by a third party to pay the lost principal and interest of a loan to you (the CDS buyer) if a borrower defaults on a loan. Which of the following is false? O A. A Swap completely solves the problem that company X might default OB. A Swap solves the default problem from Company X on the condition that the third party (CDS provider) will not default. O C. When financial crisis happens, the CDS seller may have to pay recovery to many CDS buyers, and then the CDS seller could default. O D. B and C are part of the reasons for 2008 Global financial crisis.
A MNC wishes to reduce the exposure to British pound payables, it can _________. I. Purchase pounds forward II. Buy a pound futures contract III. Buy a pound put option IV. Buy a pound call option A. I, II, III B. I, II C. II, III, IV D. I, II, IV
A credit default swap (CDS) is a privately negotiated contract which you can use to: Question 2 options: hedge prepayment risk on a pool of mortgages. hedge default risk on fixed income assets. hedge interest rate risk on fixed income assets. hedge exchange rate risk on euroyen deposits.
e) describe the expiration and exercise procedures commonly used in derivatives exchanges. f) describe over-the-counter (OTC) derivatives trading and the risks involved in OTC trading versus exchange trading. g) discuss the role of the clearinghouse in derivatives trading. h) explain the concepts of initial margin, maintenance margin, and margin call.
MCQ & True/false : International Financial Management: 1. Which of the following is true of options? (a) The buyer decides if the options will be exercised. (b) The seller decides if the options will be exercised. (c) The seller pays the buyer the option premium. (d) All of the above 2. Currency futures contracts specify a standard volume of a particular currency to be exchanged on a specific settlement date at a specified exchange rate. (a) True (b) False 3. A UK-based MNC expects to receive £20,000 from domestic operations and 20,000 Euro (€) from a business in Belgium. If the pound’s value is €1.0959, they expected total cash flow in pound are: (a) £42,000 (b) £41,000 (c) £39,470 (d) £38,250

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