Not all credit risk can be removed with a credit defau O counterparty risk still exists interest rate risk still exists swaps are not traded on an exchange O all of the above

Q: Explain carefully how swaps allow firms and banks to separate different types of fixed income risk.…

A: An interest rate swap is a contract between two parties in which one stream of interest payments is…

Q: Hedging translation exposure with forward contracts can backfire if the currency being hedged…

A: The answer and the explanation can be seen below:

Q: Swap transactions are typically heterogeneous in terms of maturities, indexes, used to determine…

A: Swap transactions are derivatives transactions

Q: hy not?

A: Introduction : A forward contract can be seen as a private, customizable contract which is exchanged…

Q: securities in an inefficient market are in equilibrium and fairly priced in the sense that the price…

A: Market can be efficient and inefficient

Q: The following statements relate to derivatives. Which of the following is FALSE? a. Swaps may have…

A: Options are contingent claims, while swaps and future contract are forward commitments. This implies…

Q: When considering counterparty credit risk, which of the following financial products has the largest…

A: Counterparty credit risk (CCR) is the risk that a transaction's counterparty may default before the…

Q: A trade finance instrument not supported by bank guarantee is called   O a. Irrevocable LC   O…

A: Answer: There are various types of financial instruments that can be traded on return of any goods…

Q: which one is correct please confirm? Q3: The disadvantage of swaps is that they     lack…

A: Swap are arranged payment of interest or currency  payments with other interest payments or currency…

Q: (Based on Appendix 12B) When market rates of interest rise after a fixed-rate security is purchased,…

A: Held-to-maturity security: The debt securities which are held by the investor with intent to hold…

Q: Which of the following is incorrect regarding margin trading? O a. The relationship between security…

A: Margin trading (MT) is the benefit which is provided by the trader to the investors to purchase…

Q: A position in T-bond futures should be used to hedge falling interest rates and a position in T-bond…

A: A long position in a financial instrument means the holder of the position owns a positive amount of…

Q: Choose True or False: [T / F] Through credit derivatives, a firm can separate the credit risk…

A: Credit derivates is that financial contract that allows creditors to transfer to third party in case…

Q: How does a credit default swap work?

A: The credit default swap is a financial derivative and an agreement between two parties. The seller…

Q: Which one of the following statements is correct for an interest rate swap? A. There is an exchange…

A: interest rate swap is the exchange of  future interest payment with other type od future interest…

Q: Which of the following most accurately describes the behavior of credit default swaps?a. When credit…

A: Option A is correct A) When credit risk increases, swap premiums increas

Q: A bank finds that its assets are not matched with its liabilities. It is taking floating rate…

A: A swap is a financial derivative arrangement in which two parties exchange the cash flows or…

Q: How is that a currency futures contracts eliminate the possibilty of gaining a windfall profit from…

A: As the futures or forward contract guards the buyer of the contract from the unfavourable exchange…

Q: How should this be understood, i dont understand how a positive value will give rise to a loss for…

A: OTC Market: OTC (Over the Counter) Market are markets where corporations trade derivatives without…

Q: The fact that the clearinghouse is the counterparty to every futures contract issued is important…

A: Risk is the uncertainty or potential loss in an investment decision.

Q: Which of the following about Treasuy inflation protected securities is NOT true:

A: A treasury inflation protected security is one which protects the investor from rising inflation.…

Q: Derivatives are used in risk management because they _____. a. diversify risks b. hedge risks c.…

A: In the world of Finance, risk can be classified into various types, such as :- Credit risk - It is…

Q: A derivative is a financial instrument whose value is determined by A. an underlying security. B.…

A: Derivative security: A derivative security can be defined as a financial security that  whose value…

Q: The issuance costs of new debt securities can be ignored since those costs will not be reflected in…

A: New debt securities involves issuance costs related to issue of debt like brokerage costs,…

Q: Which is not the types of foreign risk Default risk O Price risk O Sovereign risk O transactional…

A: risk: it is probability of loss.

Q: Which derivative does not reduce financial risk? a. options b. swaps c. futures d.forwards e.…

A: Financial derivative is referred as the financial instrument, which can link to the particular…

Q: n the interest parity condition, why does the exchange rate relate negatively to the interest rate?

A: Interest rate parity theory is a theory that identifies the relationship between the spot exchange…

Q: Which of the following is not a prudent practice in hedging against transactional exposures?   A.…

A: Transactional exposures mean the risk which involves in international trades. Risk of changing in…

Q: All of the following are reasons for engaging in swaptions, which one is not?  a. Swaptions are…

A: A swaption is a right that has no obligation to enter into an interest rate swap with a second…

Q: Question 1 Which of the following is true? O Forward contracts have no default risk. O Forward…

A: Solution:- Forward is an agreement in which two parties contract over the counter each other to sell…

Q: Merck is an example of a company who decided to mitigate the adverse impact of market fluctuations…

A: Correct answer is C. both interest rate swaps and currency options can be used to hedge against…

Q: Which of the following is true?   A.Forward contract buyers and sellers do not know who the…

A: Forward and futures contracts are derivatives agreements in which two parties associate to acquire…