Ms. Siva Sanggari, Treasurer of CITY Finance Berhad, has just completed a Maturity Bucket Analysis based...

  

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Ms. Siva Sanggari, Treasurer of CITY Finance Berhad, has just completed a Maturity Bucket Analysis based on the a 6-month horizon. (a) (b) (C) Month RSA (RM million) RSL (RM million) GAP (RM million) 1 44 52 -8 2 168 160 +8 3 4 160 120 220 120 -60 0 3-month KLIBOR 6-month KLIBOR If the market expectation is increase in interest rates, find the maturity bucket should Ms. Siva Sanggari worries most about. Explain why the particular bucket matters. (5 marks) Outline an appropriate hedge strategy for Ms. Siva Sanggari. Suppose the following quotes are available. Spot 1-month KLIBOR = 4.0 percent = 5.5 percent = 6.0 percent 5 6 144 240 128 170 +16 +70 Futures Maturing in 1-month KLIBOR futures = 95.5 3-month KLIBOR futures = 93.0 Maturing in 6-month KLIBOR futures = 92.5 Total 876 850 +26 (5 marks) i. Calculate interest rate Ms. Siva Sanggari 'lock-in' using your strategy in (b). (5 marks) ii. Assuming the 3-month KLIBOR is up to 1.5 percent over the period of your strategy, prove mathematically that Ms. Siva Sanggari is hedged and has locked-in her cost funds. (10 marks) Ms. Siva Sanggari, Treasurer of CITY Finance Berhad, has just completed a Maturity Bucket Analysis based on the a 6-month horizon. (a) (b) (C) Month RSA (RM million) RSL (RM million) GAP (RM million) 1 44 52 -8 2 168 160 +8 3 4 160 120 220 120 -60 0 3-month KLIBOR 6-month KLIBOR If the market expectation is increase in interest rates, find the maturity bucket should Ms. Siva Sanggari worries most about. Explain why the particular bucket matters. (5 marks) Outline an appropriate hedge strategy for Ms. Siva Sanggari. Suppose the following quotes are available. Spot 1-month KLIBOR = 4.0 percent = 5.5 percent = 6.0 percent 5 6 144 240 128 170 +16 +70 Futures Maturing in 1-month KLIBOR futures = 95.5 3-month KLIBOR futures = 93.0 Maturing in 6-month KLIBOR futures = 92.5 Total 876 850 +26 (5 marks) i. Calculate interest rate Ms. Siva Sanggari 'lock-in' using your strategy in (b). (5 marks) ii. Assuming the 3-month KLIBOR is up to 1.5 percent over the period of your strategy, prove mathematically that Ms. Siva Sanggari is hedged and has locked-in her cost funds. (10 marks)

Answer rating: 100% (QA)

a The maturity bucket Ms Siva Sanggari should be most worried about is the 6month bucket This is bec... View the full answer