A Bank with a Strong Positive Leverage Adjusted Duration Gap

question 42

Multiple Choice

A bank with a strong positive leverage adjusted duration gap can hedge their exposure to interest rate increases by entering into

• A)a currency swap agreement to receive the fixed rate payment.
• B)an interest rate swap agreement to make the fixed-rate payment side of the swap.
• C)a credit swap agreement to receive the floating rate payment.
• D)a commodity swap agreement to make the fixed-rate payment side of the swap.
• E)an equity swap agreement to make the floating-rate payment side of the swap.

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Definitions:

Short-run Cost Function

A mathematical relation that shows the total cost associated with producing a good or service, emphasizing the costs that vary with the level of output in the short term.

Productivity Factor

An indicator of the efficiency with which inputs are converted into outputs in the production process.

Production Technique

The methods and processes used by businesses to manufacture goods or provide services.

Short-run Cost Function

A representation of the total cost associated with production, considering some inputs are fixed.