What is the motivation for the purchase of an over-the-counter option?
Answer to relevant QuestionsSuppose that a dealer quotes these terms on a five-year swap: fixed-rate payer to pay 4.4% for LIBOR and fixed-rate receiverto pay LIBOR for 4.2%. Answer the below questions. (a) What is the dealer’s bid-asked spread? (b) ...An interest-rate swap had an original maturity of five-years. Today, the swap has two years to maturity. The present value of the fixed-rate payments for the remainder of the term of the swap is $910,000. The present value ...How is the swap rate calculated? For a CDS with the following terms, indicate the quarterly premium payment by filling in the below exhibit. Why is a portfolio manager concerned with more than default risk when assessing a portfolio’s credit exposure?
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