Consider Company A that holds mostly floating-rate short-term TL-denominated assets partly financed with a 50m 4-year...
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Consider Company A that holds mostly floating-rate short-term TL-denominated assets partly financed with a €50m 4-year bonds with fixed 10% annual coupons. As a result Company C is faced with both an interest rate risk and a foreign exchange risk. On the othe side, consider Bank B with mostly fixed-rate long-term €-denominated assets, which hav been partly financed with h2,000b floating-rate short-term deposits. Bank B is also faced witl interest rate risk and foreign exchange risk. Design a "fixed-to-floating currency swap between the two parties to reduce their risk exposures. Consider Company A that holds mostly floating-rate short-term TL-denominated assets partly financed with a €50m 4-year bonds with fixed 10% annual coupons. As a result Company C is faced with both an interest rate risk and a foreign exchange risk. On the othe side, consider Bank B with mostly fixed-rate long-term €-denominated assets, which hav been partly financed with h2,000b floating-rate short-term deposits. Bank B is also faced witl interest rate risk and foreign exchange risk. Design a "fixed-to-floating currency swap between the two parties to reduce their risk exposures.
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