Does it make sense for an investor who wants to speculate on interest-rate movements to purchase an over-the-counter option?
Answer to relevant Questions“I don’t understand how portfolio managers can calculate the duration of an interest-rate option. Don’t they mean the amount of time remaining to the expiration date?” Respond to this question. In implementing a protective put buying strategy, explain the trade-off between the cost of the strategy and the strike price selected. “There’s no real difference between options and futures. Both are hedging tools, and both are derivative products. It’s just that with options you have to pay an option premium, whereas futures require no upfront ...Given the current 3-month LIBOR and the Eurodollar futures prices shown in the table below, compute the forward rate and the forward discount factor for each period. How is the swap rate calculated?
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