Question: What are the differences between a microhedge and a macrohedge
What are the differences between a microhedge and a macrohedge for an FI? Why is it generally more efficient for FIs to employ a macrohedge than a series of microhedges?
Answer to relevant QuestionsAnswer the following: a. What are the two ways to use call and put options on T-bonds to generate positive cash flows when interest rates decline? b. When and how can an FI use options on T-bonds to hedge its assets and ...Explain the similarity between a swap and a forward contract.Give two reasons why credit swaps have been the fastest-growing form of swaps in recent years.Hedge Row Bank has the following balance sheet (in millions):The duration of the assets is six years and the duration of the liabilities is four years. The bank is expecting interest rates to fall from 10 percent to 9 ...An FI has purchased a $ 200 million cap of 9 percent at a premium of 0.65 percent of face value. A $ 200 million floor of 4 percent is also available at a premium of 0.69 percent of face value.a. If interest rates rise to 10 ...
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