Does anyone why they used the risk-free rates to discount instead of LIBOR in the first question of the derivatives section? Thank you
I have no idea myself! Why didn’t they use the LIBOR rates listed in the table? This methodology seems different from what they’ve used in the textbooks and confused me.
This mock was very confusing this year
because it says “yield curve is flat” and Libor is used for float rates and the scenario uses fix to fix.
*not sure about the libor part but i’m pretty sure that’s accurate.
Why does using fix to fix involve the risk free rate?
My understanding is that in a fix to fix currency swap, both fixed legs of the swaps are priced based on an assumed fixed to floating in the respective local currencies. This is how the text book explains it, is there something i might be missing?
Yeah, I can’t understand this either. I’ve never come across this before. Anyone got a good explanation?
What a curve ball this question! I got stuck for so long. Had no idea.