Question: Explain how macrohedging differs from microhedging
Explain how macrohedging differs from microhedging.
Answer to relevant QuestionsA bank has assets of $ 10 million earning an average yield of 5 percent with a weighted duration of 1.5 years. It has liabilities of $ 9 million paying an average rate of 1.5 percent with a weighted duration of 3.5 years. ...What features of interest rate swaps make them more or less attractive than financial futures as a risk management tool? Explain how the outcome from using a basic interest rate swap to hedge borrowing costs will generally differ from using an interest rate cap and an interest rate collar as hedges. Why is there a difference? Suppose that you are a speculator who trades three- month Eurodollar futures. On November 5, you sell two December three- month Eurodollar futures contracts at 96.81. The subsequent weekly quotes for the closing December ...The weighted marginal cost of funds is used in pricing decisions. Explain how it should be used if the loan being priced exhibits average risk. How should the weighted marginal cost of funds be used if the loan carries above ...
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