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Eun/Resnick4e166Eun&Resnick4eCHAPTER14InterestRateandCurrencySwapsTypesofSwapsSizeoftheSwapMarketTheSwapBankInternationalFinanceinPractice:TheWorldBank’sFirstCurrencySwapSwapMarketQuotationsInterestRateSwapsBasicInterestRateSwapCurrencySwapsBasicCurrencySwapVariationsofBasicInterestRateandCurrencySwapsInternationalFinanceinPractice:AIG,Nomura,andIFCLinkUpinLatinSwapTransactionRisksofInterestRateandCurrencySwapsIstheSwapMarketEfficient?SummaryMINICASE:TheCentraliaCorporation’sCurrencySwapTypesofSwaps1Theterminterestrateswapa)referstoa“single-currencyinterestrateswap”shortenedto“interestrateswap”b)involves“counterparties”whomakeacontractualagreementtoexchangecashflowsatperiodicintervalsc)canbe“fixed-for-floatingrate”or“fixed-for-fixedrate”d)AlloftheaboveAnswer:d)2Examplesof“single-currencyinterestrateswap”and“cross-currencyinterestrateswap”are:a)fixed-for-floatingrateinterestrateswap,whereonecounterpartyexchangestheinterestpaymentsofafloating-ratedebtobligationsforfixed-rateinterestpaymentsoftheothercounterpartyb)fixed-for-fixedratedebtservice(currencyswap),whereonecounterpartyexchangesthedebtserviceobligationsofabonddenominatedinonecurrencyforthedebtserviceobligationsoftheothercounterpartydenominatedinanothercurrencyc)a)andb)d)noneoftheaboveAnswer:c)Eun/Resnick4e1673Theprimaryreasonsforacounterpartytouseacurrencyswapare:a)tohedgeandtospeculateb)toplayinthefuturesandforwardmarketsc)toobtaindebtfinancingintheswappedcurrencyataninterestcostreductionbroughtaboutthroughcomparativeadvantageseachcounterpartyhasinitsnationalcapitalmarket,andthebenefitofhedginglong-runexchangerateexposured)a)andb)Answer:c)SizeoftheSwapMarket4Thesizeoftheswapmarketisa)Measuredbynotationalprincipalb)Over7trilliondollarsc)Botha)andb)d)NoneoftheaboveAnswer:c)TheSwapBank5Whichcombinationofthefollowingstatementsistrueaboutaswapbank?(i)-itisagenerictermtodescribeafinancialinstitutionthatfacilitatesswapsbetweencounterparties(ii)-itcanbeaninternationalcommercialbank(iii)-itcanbeaninvestmentbank(iv)-itcanbeamerchantbank(v)-itcanbeanindependentoperatora)(i)and(ii)b)(i),(ii)and(iii)c)(i),(ii),(iii)and(iv)d)(i),(ii),(iii),(iv)and(v)Answer:d)6Aswapbanka)Canactasabroker,bringingtogethercounterpartiestoaswapb)Canactasadealer,standingreadytobuyandsellswapsc)Botha)andb)d)Onlysometimesa)butnevereverb)Answer:c)7Intheswapmarket,whichpositioncarriesgreaterrisks,brokerordealer?a)Brokerb)Dealerc)Theyarethesameswaps,thereforethesamerisks.Answer:b)Eun/Resnick4e168SwapMarketQuotations8Supposethequoteforafive-yearswapwithsemiannualpaymentsis8.50—8.60percent.Themeans:a)Theswapbankwillpaysemiannualfixed-ratedollarpaymentsof8.50percentagainstreceivingsix-monthdollarLIBOR.b)Theswapbankwillreceivesemiannualfixed-ratedollarpaymentsof8.60percentagainstpayingsix-monthdollarLIBOR.c)a)andb)d)noneoftheaboveAnswer:c)9Supposethequoteforafive-yearswapwithsemiannualpaymentsis8.50—8.60percent.Themeans:a)Theswapbankwillpaysemiannualfixed-ratedollarpaymentsof8.60percentagainstreceivingsix-monthdollarLIBOR.b)Theswapbankwillreceivesemiannualfixed-ratedollarpaymentsof8.50percentagainstpayingsix-monthdollarLIBOR.c)Iftheswapbankissuccessfulingettingcounterpartiestobothlegsoftheswapattheseprices,hewillhaveanannualprofitoftenbasispoints.d)noneoftheaboveAnswer:c)10XYZCorporationentersintoa6-yearinterestrateswapwithaswapbankinwhichitagreestopaytheswapbankafixed-rateof9percentannuallyonanotionalamountofSF10,000,000andreceiveLIBOR–½percent.Asofthethirdresetdate(i.e.mid-waythroughthe6yearagreement),calculatethepriceoftheswap,assumingthatthefixed-rateatwhichXYZcanborrowhasincreasedto10%.a)SF248,685b)SF900,000c)SF2,700,000d)SF7,300,000Answer:a)Rationale:PVofahypotheticalbondissueofSF10,000,000withthreeremaining9percentcouponpaymentsatthenewfixedrateof10percentisSF9,751,314.80Year0Year1Year2Year30SF900,000SF900,000SF10,900,000Atanyresetdate,thevalueoftheadjustableratebondsideofthisisparvalue=SF10m.(assumingnochangeincreditworthiness)Therefore,thepriceoftheswap=SF10,000,000–SF9,751,315=SF248,685.Eun/Resnick4e16911Supposethequoteforafive-yearswapwithsemiannualpaymentsis8.50—8.60percentindollarsand6.60—6.80percentineuroagainstsix-monthdollarLIBOR.Themeans:a)Theswapbankwillenterintoacurrencyswapinwhichitwouldpaysemiannualfixed-ratedollarpaymentsof8.50percentagainstreceivingsemiannualfixed-rateeuropaymentsof6.80.b)Theswapbankwillenterintoacurrencyswapinwhichitwouldpaysemiannualfixed-rateeuropaymentsof6.60percentagainstreceivingsemiannualfixed-ratedollarpaymentsof8.60.c)a)andb)d)noneoftheaboveAnswer:c)InterestRateSwaps12Aninterest-onlysinglecurrencyinterestrateswapa)Isalsoknownasaplainvanillaswapb)Isalsoknownasaninterestrateswapc)Isaboutassimpleasswapscangetd)AlloftheaboveAnswer:d)BasicInterestRateSwap13CompanyXandcompanyYhavemirror-imagefinancingneeds(theybothwanttoborrowequivalentamountsforthesameamountoftime.CompanyXhasaAAAcreditrating,butcompanyY’screditstandingisconsiderablylower.a)CompanyXshoulddemandmostoftheQSDinanyswapwithYascompensationfordefaultrisk.b)SinceYhasapoorcreditrating,itwouldnot
本文标题:Ch014-Interest-Rate-and-Currency-Swaps
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