Which of the following is NOT an external method of interest rate risk management? *       A. Using an interest rate swap       B. Using financial futures       C. Using an off-balance-sheet strategy, such as a forward rate agreement       D. Having fixed-interest assets financed by fixed-interest liabilities and equity

Q: FINANCIAL RISK MANAGEMENT  Briefly explain what is Interest Rate Swap and who are the parties in an…

A: Swap is commonly used if any company can borrow money at any particular interest rate but prefers a…

Q: "Futures contracts allow individual investors to protect themselves against volatility in interest…

A: Future contracts are derivative contracts which allows investors to purchase a security/commodity or…

Q: assets that you add it to ii. The amount of a portfolio's risk that is diversified away depends on…

A: Step 1 Unsystematic risk refers to a general risk to the company or industry. Informal risk is also…

Q: .Under a cash and carry arbitrage, which of the following is correct? a) If the futures contract is…

A: Hi, since you have posted multiple questions, we will answer only the first one, as per the…

Q: Do derivatives markets give participants the beneficial opportunity to adjust risk exposures to…

A: The derivatives are the contract between the two parties, where the value is determined by the…

Q: hy not?

A: Introduction : A forward contract can be seen as a private, customizable contract which is exchanged…

Q: securities in an inefficient market are in equilibrium and fairly priced in the sense that the price…

A: Market can be efficient and inefficient

Q: Explain how alternative investments can act as a hedge against inflation.

A: Alternative Investments:  Stocks, bonds are financial instruments that fall under the category of a…

Q: Which of the following is a reason why the default risk of a futures contract is assumed to be less…

A: Derivatives securities are trading into the market for the purpose of gaining returns. These…

Q: An efficient capital market is best defined as a market in which security prices reflect which one…

A: Efficient Capital Market: It is the market where all  available information is reflected in asset…

Q: A position in T-bond futures should be used to hedge falling interest rates and a position in T-bond…

A: A long position in a financial instrument means the holder of the position owns a positive amount of…

Q: premium

A: Introduction: Nominal interest rate can be defined as the interest rate before taking the effects of…

Q: The Capital Asset Pricing Model (CAPM) considers which type of risk in pricing the expected returns…

A: Capital Asset Pricing Model is used for pricing risky securities. It describes the risk and return…

Q: Question 2 a) Give an example of how a swap might be used by a portfolio manager. b) Explain the…

A: Swap Agreement: As part of the deal, one party commits to make a series of payments at a certain…

Q: What are some examples of financial instruments that can be used for hedging interest rate risks,…

A: Interest rate risks are the risk of losing value of the investment as the market interest rate…

Q: Recommend how MR D.I.Y. Group (M) Berhad could manage the interest rate risk and foreign exchange…

A: Introduction  Derivatives are financial instrument that have values derived from other assets like…

Q: This is is the question related to the course "Financial Derivatives and Risk Management" Why are…

A: Option Pricing Models: There are two main models that are used to value options. They are: The…

Q: Analyze the use of FX Derivatives, Cost of Capital & Dynamic Risk Management Strategies?

A: FX derivatives (Foreign exchange derivative) is defined as the financial derivative, where its…

Q: Describe forwards, futures, and swaps.  What are the features of each type of derivative and how are…

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

Q: Which of the following are all traditional credit risk enhancement techniques? Group of answer…

A: credit risk mitigation technique is institutional collatoral agreement used to reduced credit risk.

Q: hich of the following is not an advantage of a repurchase agreement (repo) market? a.…

A: A repurchase agreement (repo) is a form of short-term financial support for government mortgage…

Q: Which of the following statement is true a. Gold generally provides a hedge against inflation over…

A: A capital market is a market where the long-term securities and equity securities are traded.…

Q: The number of futures contracts that a bank will need in order to fully hedge its overall interest…

A: Note: Since you have posted multiple independent questions in the same request, we will solve the…

Q: The ____ theory holds that the securities markets are demarcated by maturity.   a. expectations…

A: Expectations theory attempts to predict what short-term interest rates will be in the future based…

Q: Which of the following statement about the yield curve is false? O According to expectations theory,…

A: Yield Curve: It is a line that plots the interest rates of bonds. It represents the different ranges…

Q: In the futures markets, arbitrageurs are mainly interested in: a. reducing their exposure to risk of…

A: Arbitrage in futures means taking the benefit of differential prices among different markets.

Q: The fact that the clearinghouse is the counterparty to every futures contract issued is important…

A: Risk is the uncertainty or potential loss in an investment decision.

Q: Which of the following about Treasuy inflation protected securities is NOT true:

A: A treasury inflation protected security is one which protects the investor from rising inflation.…

Q: Explain the call-put parity relation and how it is justified

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: Forwards and Futures: How are forwards and futures similar? How are they different? Briefly explain…

A: A forward contract is referred to the customized contract, which is between the two parties for…

Q: "Financial Derivative and Risk Management" Why are the probabilities of stock price movements not…

A: Option prices are basically the sum of the intrinsic and time value of an option. The price…

Q: Which derivative does not reduce financial risk? a. options b. swaps c. futures d.forwards e.…

A: Financial derivative is referred as the financial instrument, which can link to the particular…

Q: Which one of the following statements about the term structure of interest rates is true?a. The…

A: Term structure of interest rates depicts the relationship between the interest rate or yield and…

Q: example of how a swap might be used by a portfolio manager.    a)Explain the nature of the credit…

A: Swaps Swaps are referred to as the derivative contracts through which cash flows are exchanged by…

Q: The risk structure of interest rates and the term structure of interest rates are identical. True or…

A: The risk structure of interest rate refers to the differences in default risk, liquidity, and Income…

Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.