Chapter 14 Interest Rate and Currency Swaps
Multiple Choice Questions
1. The term interest rate swap
A. refers to a "single-currency interest rate swap" shortened to "interest rate swap"
B. involves "counterparties" who make a contractual agreement to exc
In this lecture we will discuss how options markets
are organized, what terminology is used, and how
the contracts are traded.
Options are fundamentally different from forward
and futures contracts.
An option gives the holder the right to do
Identify the letter of the choice that best completes the statement or answers the question.
1. Which of the following theories identifies specialization as a reason for international business?
a. theory of comp
Interest Rate Parity
Financial managers of MNC must understand
how international arbitrage realigns exchange
rate because it has implications for how they
should use the foreign exchange market to
facilitate their internati
Managing Transaction Exposure
An important task of the financial manager is
to measure foreign exchange exposure and to
manage it so as to maximize the profitability,
net cash flow, and market value of the firm.
Foreign exchange exposure
Earlier we said that a forward contract is a vehicle
for buying or selling a stated amount of foreign
exchange at a stated price per unit at a specified time
in the future.
A futures contract is an exchange-traded version of
the forward contract.
1. Which of the following is the most likely strategy for a U.S. firm that will be receiving Swiss
francs in the future and desires to avoid exchange rate risk (assume the firm has no offsetting
position in francs)?
A) purchase a call op
Globalization and the
This introductory lecture describe the ways in
which globalization occurs and why this is
important for corporations.
Why study International Finance
International Financial Markets:
In this lecture, we discuss the structure of global
currency markets, focusing on how currencies are
quoted and traded as well as the motives for currency
Foreign Exchange Market
Effects of Changes in the Exchange Rate
In this lecture, we focuses on investments by
individual investors and financial institutions.
Why invest internationally?
In this lecture we will discuss swaps: interest rate
swaps and currency swaps.
A swap is an agreement between two parties to exchange a series
of cash flows (or assets) for a specified period of time.
The agreement de
In this lecture we will discuss currency
combinations and spread trading strategies.
In addition to basic call and put options, a variety of
currency option-trading strategies are available to
speculator and hedger.
Now that we have defined the basic ter
In this lecture, we will highlight the importance of
the currency derivative markets and begin to discuss
their roles in financial risk management.
In addition to stocks and bonds, there is a wide array
of products collectively referred to as financial