Rechinman is a Fixed Income PM and due to recent IR voalility would like to hedge his IR risk. What would be the most apprpropiate way to construct a IR collar using 2 year 6% floor and 2 yr 12% cap?
Buy Floor buy cap
buy floor and sell cap
sell floor and buy cap
In schweser book5 P320 it says there are two types of collars:
buy cap and sell floor
buy floor and sell cap
Can someone please explain why the answer is C and not B…
Thanks
