Higher fixed rate than the vanilla swap because he has the right to cancel the swap
Lower fixed rate than the vanilla swap because he has passed the right to cancel the swap to the other party
Higher floating rate than the vanilla swap because he has the right to cancel the swap
Lower floating rate than the vanilla swap because he has passed the right to cancel the swap to the other party
Sell a cap
Buy a floor
Enter into a Payer Swap
Enter into a Receiver Swap
Both the Floor and the Payer Swap will provide him protection against rising interest rates
The holder of the swaption will only exercise his option if the market rate for a 5Y swap at expiry is greater than 1.75%
The holder of the swaption will only exercise his option if the relevant LIBOR rate at expiry is greater than 1.75%.
The holder of the swaption will exercise if the market rate for a 5Y swap is less than 1.75%
The holder of the swaption will only exercise his option if the LIBOR rate at expiry isless than 1.75%
Around -140,000 USD
Around 40,000 USD
Around 130,000 USD
Around 315,000 USD
Because it creates a lower fixed rate where the yield curve is steep
Because they have a loan with a single repayment on maturity
Because they have the right to pay back their loan early
Because they hold or about to take a loan which they are scheduled to pay back incrementally over the loan's life.
Pay fixed USD interest and EUR floating interest
Pay EUR floating interest on 100M EUR
Pay no interest as the swap and the bond interest cancel out
Pay USD fixed interest on $137m
The yield must be less than the coupon the bond is paying
The yield must be equal to the coupon the bond is paying
The yield must be greater than the coupon the bond is paying
It is impossible to say
Pay fixed swaption collar
Callable swap
Pay fixed swap
Pay fixed swaption
Maximum 4% Minimum 2%
Maximum 4% Minimum 1.5%
Maximum 5.5% Minimum 0.5%
Maximum 5.5% Minimum 3.5%
Interbank deposit rates (eg LIBOR), FX Swaps, and IRS
Interbank deposit rates (eg LIBOR), Government Bonds or CME Futures, and CMSs
Interbank deposit rates (eg LIBOR), Futures or FRAs and IRS
Interbank deposit rates (eg LIBOR), Futures and Swaptions
The minimum payment is 0.6% even if Libor is outside the range over the observation dates
The structured coupon payer will benefit if 3m Libor moves outside the range 0.5 - 3%
The floating leg payer will benefit if 3m Libor moves outside the range 0.5 - 3%
Payer swap + Receiver swap with different frequency
Payer swap + Buy Receiver swaption
Payer swap + Sell Receiver swaption
Payer swap+ Buy Payer swaption
Payer swap+ Sell Payer swaption
1 bp in LIBOR
1% in LIBOR
1 bp in the yield curve
1% in the yield curve
Enables the counterparty receiving the collateral to choose which currency they want as collateral
Does not have any effect on the swap, but enables greater convenience in collateral management
Choose to post collateral in the currency that will give the highest return
Raise the margin thresholds in the underlying CSA
When the customer is trading with a CSA and posts daily collateral
When the customer is trading without a CSA and does not post daily collateral
When the customer is doing long tenor trades
When the customer is doing short tenor trades
It has multiple expiry dates
The underlying swap of a Bermudan Swaption has the same tenor regardless of the expiry date chosen
A Bermudan Swaption is more expensive than the same Vanilla Swaption (same strike, tenor, etc)
A Bermudan Swaption will have the same ATMF Rate as the Vanilla with the same charecteristics (tenor, currency, etc)
1y5y swaption with strike of 3% observation index 1M LIBOR
1y Forward starting 5y General swap
1y Forward starting 5y Vanilla swap
6y callable swap observation index 6m LIBOR
180; 120; 180
120; 180; 180
180; 300
300; 180
A. Open Pricing table and shift the floating spread by 10bp
B. Shift yield curve by 10 bp; accept and recalculate pricer for updated NPV using original fixed rate
C. Subtract the value of vega * 10 from the NPV
D. Use the new scenario tool to set curve shifts and view MV
both b and d are correct
April 1, 2014
July 1, 2014
April 4, 2016
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