>There was a question regarding the difference between using the swap vs a government security… Something like least likely reason to use a swap… more regulation than government… _________ I think what you are referring to was in the fixed income section, but I may be wrong (it’s all running together at this point). Swap spread vs. spread on Treasuries or something like that, with regard to credit analysis. ??
the am was: 1. currency forward 2. 8 cents 3. spot/forward gold prices 4. futures>value than forwards 5. risk neutral for expectation of future spot rate 6. 75 cent normal backwardation
There were 2 separate qts on swap spread. One in FI which had the answer about govt regulation. And there was a second one in derivs… and the answer for that was that it was correctly stated from what I remember.
the one in swap, is it about counterparty risk?
yes
What was the 0.08 (8 cents) about? Can’t remember it. Is the 75 cent normal backwardation about the breakeven stuff?
Re: the floor qn, my recollection is what should the investor do to offset the cost of the floor if he thinks the rates would not raise too much. I chose sell a cap.
cp0821 Wrote: ------------------------------------------------------- > still missing 2 everyone. this is for 5050/5151. > > > AM: > > 1) > > 2) ‘risk neutral’ when fut=fwd > > 3) $ fwd discount 2.55% > > 4) future > fwd when pos corr to int > > 5) -0.8 > > 6) 0.75 backwardian > > > > PM: > > 1) swap rate 4.6% > > 2) buy rec swaption > > 3) 117k > > 4) 25k > > 5) buy p/sell c > > 6) > > anybody remember more? I’m not sure if pm #5 is in > this swap set or not. It looks like the questions for derivatives were quite similar with the 6060 and 6161 set. If I am wrong do let me know. I guess the 6th question in PM for 6161 was swap spread and something to do with counterparty credit risk. Assuming questions were same for 6060 and 6161 then for now I am 10/10…thats good.
2.55% forward discount was in econ, not derivatives
On this forward discount Did they ask for an annualized discount or not?
annualized. answer was 2.55% discount
And was the other answer something above 3?
MarkvanOmmen Wrote: ------------------------------------------------------- > And was the other answer something above 3? Yeah, there was one where we had a staight up “px the forward” calc’n… I think it was 3.xx The .08 was the loss… it was .03 + the (FV) carrying cost .05= .08
There was something about paladium, the metal?
hey guys what was the 25 k question about ? i dont seem to remember there was also a question how to take advantage from arbitrage with gold being mispriced
that was the value of a 90day floor. the diff b/w the floor rate and the spot rate was 0.1% annualized so you had to make it into quarterly to get the payment
I am still unsure about the options question I thought mine asked what is an alternative to protect from decreases and still have a low hedging cost considering a situation when interest rates won’t rise sharply… so i put buy a set of calls(protect from a decreases) and sell puts ( lower the cost of calls ) there also was a question that asked what should the convenience of holding the asset so that backwardation occurs( don’t remember the ans but there was only one that took the price below spot) also if anybody better remembers the gain question 3/8 cents. what is the one that said consider future price and the future value of carring costs?? thanks
oh and i cant remember anything with 25k but i remember the floor value being 120k the options were -120,0,120 and something else…
I agree with you florinpop regarding the options question(buy call and sell put). Answer should be a ‘collar’ (+c-p)
net jade, i cold swear the answer was buy put sell call…didn’t question ask to protect from lower rates without worrying about big spikes in rates, so buying puts gets you the downside and selling calls gets you the financing.