1.Compared to a yield curve based on government bonds, swap rate curves are: A) less comparable across countries and have a greater number of yields at various maturities. B) more comparable across countries and have a greater number of yields at various maturities. C) less comparable across countries and have a smaller number of yields at various maturities. D) more comparable across countries and have a smaller number of yields at various maturities. The correct answer was B) Swap rate curves are typically determined by dollar denominated borrowing based on LIBOR. These rates are determined by market participants and are not regulated by governments. Swap rate curves are not affected by technical market factors that affect the yields on government bonds. Swap rate curves are also not subject to sovereign credit risk (potential government default on debt) that is unique to government debt in each country. Thus swap rate curves are more comparable across countries because they reflect similar levels of credit risk. There is also a wider variety of maturities available for swap rate curves, relative to a yield curve based on US Treasury securities, which has only three on-the-run maturities of two years or more. Swap rate curves typically have 11 quotes for maturities between 2 and 30 years. 2.Which of the following is NOT a reason why market participants prefer the swap rate curve over a government bond yield curve? The swap market: A) is free of government regulation. B) has a greater variety of maturities. C) it is not affected by technical factors. D) reflects sovereign credit risk. The correct answer was D) Swap rate curves are typically determined by dollar denominated borrowing based on LIBOR. These rates are determined by market participants and are not regulated by governments. Swap rate curves are not affected by technical market factors that affect the yields on government bonds. The swap rate curve is also not subject to sovereign credit risk (potential government default on debt) that is unique to each country. There is a wider variety of maturities available, relative to a yield curve based on US Treasury securities, which has only three on-the-run maturities of two years or more. The swap rate curve typically has 11 quotes for maturities between 2 and 30 years. 3.The swap rate curve is typically based on which interest rate? A) LIBOR. B) The Fed Funds rate. C) The discount rate. D) Treasury bill and bond rates. The correct answer was A) The interest rate paid on negotiable CDs by banks in London is referred to as LIBOR. LIBOR is determined every day by the British Bankers Association. Swap rate curves are typically determined by dollar denominated borrowing based on LIBOR. The Fed Funds rate is the rate paid on interbank loans within the U.S. The discount rate is the interest rate that the Federal Reserve changes member banks for loans. Treasury bill and bond rates are used for determining the yield curve, but not for the swap rate curve. | 
发表于 2008-4-18 11:27
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