When banks become reluctant to lend to each other the 3-month LIBOROIS spread increases. Explain this statement.

Question:

‘‘When banks become reluctant to lend to each other the 3-month LIBOR–OIS spread increases.’’ Explain this statement.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For answer-question

Options Futures And Other Derivatives

ISBN: 9781292212890

9th Global Edition

Authors: John Hull

See More Books

Question Posted: Mar 16, 2024 01:00 PM

See More Questions

Notwithstanding the discussion in Section 12.1.4, since we forecast based on Libor, the martingale equation only holds for risky discounting at the credit-worthiness of Libor counterparts. As such,...
26. During recessions and economic slowdowns, investment, including foreign investment, typically goes up, as recessions create many profitable investment opportunities. This is what happened in the...
"internet radios" for streaming audio, and personal video recorders and players. Describe design and evaluation processes that could be used by a start-up company to improve the usability of such...
Use the following data to calculate cost of merchandise sold under the FIFO method. September 1 Beginning Inventory 15 units at $20 each September 10 Purchase 20 units at $25 each September 20...
Suppose x has a mound-shaped symmetric distribution. A random sample of size 16 has sample mean 10 and sample standard deviation 2. (a) Check Requirements Is it appropriate to use a Student's t...
Knowing that dC = 4 m, determine (a) The reaction at A, (b) The reaction at E. +4 m 4 n+4 m-+4 m- de 12 kN 0.8 KN 12 KN
Rockstar Games, a subsidiary of Take-Two Interactive, released the video game Grand Theft Auto V in 2013. The game features a character named Lacey Jonas, a self-proclaimed actress slash singer and...
1. Calculate the 2010 and 2009 liquidity ratios identified using the Ratio Analysis table above. Also calculate the change and the percentage change for the ratios and complete the table. 2. Analyze...
what is meant by the term functionality of a database management system? Explain the responsibility of any two functionalities of a database management system. Discuss how a database transaction is...
Why do derivatives traders sometimes use more than one risk-free zero curve for discounting?
Explain what is meant by (a) the 3-month LIBOR rate and (b) the 3-month OIS rate. Which is higher? Why?
Jim's computer is giving him trouble, so he brings it to the local computer repair shop, Star Tech Computers. Jim has an expensive state-of-the art machine tricked out for computer gaming. Star Tech...
How are WHS participative requirements managed? More detail is needed. Participative requirements includes HSCs and HSRs. Think also in terms of consultation, training and communication with workers.
Analyze key trends in health care and determine two factors that cause these trends to affect human resource managers and employees. Provide specific examples to support your rationale.
What are the primary characteristics of music from the Classical Era? How does the music of the Classical Era differ from the Baroque? Compare and contrast two specific pieces of music in your post...
Lower Manhattan Federal Attorneys Office (LMFAO) is putting together its financial plan for next year (2022). LMFAO is considering whether to purchase land to build a new office building. The land...
Why is it so difficult for people to find new ways of approaching problems? What keeps us from finding unique solutions to common problems?
A British thermal unit (Btu) is a unit of heat in the British system of units. One Btu is defined as the heat needed to raise 1. IB of water by 1Fo show that 1 Btu = 0.252 kcal = 1055 J.
Explain the Hawthorne effect.
Assume that the price of currency A expressed in terms of the price of currency B follows the process dS = (r B r A )S dt + S dz where r A is the risk-free interest rate in currency A and r B is the...
A stock index is currently 300, the dividend yield on the index is 3% per annum, and the risk-free interest rate is 8% per annum. What is a lower bound for the price of a six-month European call...
A currency is currently worth $0.80 and has a volatility of 12%. The domestic and foreign risk-free interest rates are 6% and 8%, respectively. Use a two-step binomial tree to value a) a European...
Using Excel calculate the NPV, IRR and the MIRR for Projects A and B (Take answers out to the second decimal place... Example 13.45%) (22 pts.) Project A WACC 13.0% Project B WACC =13.0% = Year CF...
The aim of this question is to make you better understand the characteristics of the CAL. Stick to the market described in the previous question after we added the risk-free asset with return rf =...
Consider two assets with mean returns, standard deviations and correlation matrix: = (0.05) =(0.04) c=(044) M =min xx-xx-1) Compute the covariance matrix . Consider the following portfolio...

When banks become reluctant to lend to each other the 3-month LIBOROIS spread increases. Explain this statement.

Question:

Step by Step Answer:

The statement refers to a financial phenomenon involving two key interest rates the London Interbank Offered Rate LIBOR and the Overnight Index Swap O...View the full answer

Options Futures And Other Derivatives

Students also viewed these Business questions