[2008]Topic 15: Swaps相关习题 beginning, interest, payments, standard, parties

Baran

AIM 1: Explain the mechanics of a plain vanilla interest rate swap and compute its cash flows.

 

1、In a standard interest rate swap, the floating rate payments to be made at the end of each period are determined:

A) at the end of the period.
 
B) by the parties at inception of the swap.
 
C) at the beginning of the period.
 
D) by the parties at the conclusion of the swap.

Baran

The  correct answer is C
In a standard swap, the interest rate used to determine the floating rate payment is set at the beginning of each period.

Baran

2、The notional principal of a default swap is $30,000,000, and the reference price is 100%. The final price is estimated at 25%, and the annual coupon rate was 9%. It has been 60 days since the last coupon payment. What is the cash amount to settle the swap?

A) $22,500,000.
 
B) $22,050,000.
 
C) $19,800,00.
 
D) $7,950,000.

Baran

The  correct answer is B

The cash settlement of the default swap is the notional principle times the reference amount minus the final price and accrued

interest:

settlement amount = $30,000,000 × [100% ? (25% + 9% × (60 / 360))] = $22,050,000.

Baran

AIM 3: Evaluate the advantages and disadvantages of the comparative advantage argument used for the existence of the interest rate swap market.

1、A primary criticism with the comparative advantage argument as justification for the existence of swaps is related to which of the following?

A) Credit risk.
 
B) Perceived advantage in one market over the other.
 
C) Constant spreads over London Interbank Offered Rate (LIBOR).
 
D) Inefficient credit markets.

Baran

The  correct answer is A
Credit risk is the main criticism of the comparative advantage argument, which fails to take into account the fact that a swap participant faces credit risk.

[此贴子已经被作者于2009-6-24 17:01:10编辑过]

Baran

2、The success of the currency swap markets has been explained by which of the following?

A) Reduced counterparty risk arguments.
 
B) Efficient exchange rate pricing arguments.
 
C) Comparative advantage arguments.
 
D) Floating interest rate risk arguments. 

Baran

The  correct answer is C
Comparative advantage arguments have also been used to explain the success of currency swap markets.

Baran

AIM 5: Value a plain vanilla interest rate swap based on two simultaneous bond positions.

1、A firm has entered into a $22.5 MM plain vanilla interest rate swap in which it pays fixed at 4.2 percent and receives LIBOR. At inception, what is the firm’s credit exposure on this swap if LIBOR is 3.2 percent?

A) $0.
 
B) $225,000.
 
C) $11.25 MM.
 
D) $22.5 MM.

Baran

The  correct answer is A
The value of a plain vanilla swap at inception is zero as the swap fixed rate (SFR) is set to make the PV of both the fixed and expected floating rate payments equal.