How does a futures contract differ from a forward contract?
Answer to relevant QuestionsExplain how macrohedging differs from microhedging. Discuss the role of a third party intermediary in an interest rate swap agreement. Describe the risks assumed by the intermediary. How does the intermediary potentially profit from this activity? What are the risks in a FRA if you are the buyer? Answer the following questions: a. When will the buyer of a five year cap on three- month LIBOR with a 1 percent strike rate expect to receive cash? What is the cap premium? ...Some analysts compare the initial margin on a futures contract to a down payment. Some label it a performance bond. What is the difference between these interpretations? Use the following information to estimate the marginal cost of issuing a $ 1 million CD paying 3.25 percent interest. It has a one- year maturity and the following estimates apply relative to the balance obtained: ...
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