explain the structure of a pay-fixed, receive-fixed currency swap, and describe the cash flows at its initiation date, settlement dates, and termination date.     b)explain how to determine the notional amounts in two currencies in a currency swap.       c)explain the equivalency between a currency swap and a pair of bond transactions in different currencies.       d)describe the four types of currency swaps.       e)describe the relationship between currency swaps and interest rate swaps.

A dual-currency bond makes coupon interest payments in one currency and the principal repayment at maturity in another currency.   Select one: True False

Explain with examples how to measure exchange rate risk for long positions and short positions Notes : Use your own numbers in making calculations!

Which of the following statements about interest rate swaps is/are true? I - The notional principals are exchanged by the counterparties at the end of an interest rate swap's life II - The differences in how credit risk is priced gives rise to comparative advantage in borrowing through swaps. III - When an intermediary is involved in a swap, the intermediary assumes no counterparty risk for either end of the transaction IV - It is possible for both counterparties to benefit from a swap even if one counterparty has the absolute advantage in all types of borrowing O a. I, II, III, and IV O b. II and IV O c. II, III, and IV O d. I, II, and IV Oe. II and III

A swap contract Select one: A. relates to the trading of an asset owned by one company for another owned by a second company. B. is an arrangement between two or more parties to exchange future cash flows. C. can be used to increase or decrease the ratio of fixed and variable interest costs in its cost structure. D. Both B and C are true.

a)define interest rate swaptions, and differentiate between payer swaptions and receiver swaptions.    b)define forward swaps.     c)define risk management.    d)discuss reasons for practicing risk management.    e)discuss how firms can benefit from risk management.

h) discuss the relationship between the prices of puts, calls, and forward/futures contracts on the same underlying asset using the put-call-forward/futures parity.      i) discuss the boundary conditions on the prices of American and European call option contracts on futures.       j) explain and discuss the use of interest rate parity in pricing foreign currency forwards and futures.      k) describe how spot prices are determined using the cost-of-carry model.

a)explain how to price a currency swap if either set of payments is at a floating rate.       b)explain how a currency swap can be used to convert a loan in one currency into a loan in another currency, and provide some reasons for doing so.      c)demonstrate that a currency swap contract is equivalent to a series of forward contracts.       d)explain how a currency swap can be used to hedge a stream of foreign cash flows.     e)define interest rate derivatives, and compare and contrast them against bond derivatives.

D3) Finance Use covered interest rate parity (CIP) to show that a fixed exchange rate and free capital flows imply that a central bank cannot set the interest rate independently from the interest rate set by the reference currency's central bank.