When considering counterparty credit risk, which of the following financial products has the largest outstanding notional amount in the marketplace A. Credit default swaps. B. Foreign exchange forwards. C. Interest rate swaps. D. Repos and reverse repos

The interest rate observed in the marketplace for a debt instrument?     Observed interest rate     Inflation-free interest rate     Risk-free rate of interest     Real rate of interest

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.

Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to have a positive gap, this means: Group of answer choices C. Rate-sensitive assets exceed rate-sensitive liabilities B. Long-term assets are funded with short-term liabilities D. Rate-sensitive assets equal rate-sensitive liabilities A. Liabilities reprice before assets

All of the following are credit derivatives except: Group of answer choices C. Spread options D. Credit-linked notes B. Credit default swaps (CDS) A. Remics

The time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates change

A synthetic Collateralized Debt Obligation uses credit default swaps to increase the credit risk of its assets. O True O False

A credit default swap (CDS) is a privately negotiated contract which you can use to:   Question 2 options:   hedge prepayment risk on a pool of mortgages.   hedge default risk on fixed income assets.   hedge interest rate risk on fixed income assets.   hedge exchange rate risk on euroyen deposits.

pm.8

1. Credit spreads least likely depend on which of the following:   A. Market supply   B. Market demand   C. Financial markets   D. Inflation