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Category > Business & Finance Posted 29 Jul 2017 My Price 7.00

1. Is a total return swap on a bond the same as a credit default swap? Why or why not?

 

1. Is a total return swap on a bond the same as a credit default swap? Why or why not?

2. “Speculators want futures contracts to be incorrectly priced; hedgers want them to be correctly priced.” Why?

3. Your investment bank has an investment of $100 million in the stock of the Swiss Roll Corporation and a short position in the stock of the Frankfurter Sausage Company. Here is the recent price history of the two stocks:

     

Month

Frankfurter Sausage

Swiss Roll

January

-10

-10

February

-10

-5

March

-10

0

April

+10

0

May

+10

+5

June

+10

+10

On the evidence of these six months, how large would your short position in Frankfurter Sausage need to be to hedge you as far as possible against movements in the price of Swiss Roll?

 
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Status NEW Posted 29 Jul 2017 03:07 PM My Price 7.00

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