Question: Answer 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

Answer 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 liabilities against interest rate declines?
c. Is it more appropriate for FIs to hedge against a decline in interest rates with long calls or short puts?

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