Mink is managing risk for Casford Bank. So I am assuming this is a lender becuase it is a bank. Then, we need to buy put and sell call to keep the receipts within the two rates, right?
However, in Question 4, they mentioned “any upside after a Libor of 6% is captured by the buyer of the call, and the floor is established at a Libor of 4.5%, the exercise rate for the put.”
So, they are using a long call + short put. Because they are a lender, why they didn’t long put and short call?
Thank you!