If a Dealer Needs to Hedge an Over-Lent 3x6 Position

question 527

Multiple Choice

If a dealer needs to hedge an over-lent 3x6 position against 1MM dates for which the FRA is quoted 1.30-1.34% and futures at 98.64, which would be cheapest for him (ignoring margin costs on futures positions) to cover his gap?

• A) FRA
• B) Futures
• C) No difference
• D) Too little information to decide

Understand the role of honesty and clarity in delivering bad news.

Recognize the psychological impact of how bad news is delivered on the receiver's acceptance.

Understand the classification and accounting for held-to-maturity securities.

Recognize the nature of multinational corporations and their operations.

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Definitions:

Deforestation

The large-scale removal of forest land or tree plantations, often resulting in damage to the quality of the land.

Soil Nutrient Loss

The depletion of essential minerals and compounds from soil, often due to factors like erosion, over-farming, or leaching, which can reduce soil fertility and agricultural productivity.

Global Climate Change

An ongoing trend toward warmer temperatures and shifts in climate patterns worldwide; caused by a rise in greenhouse gases.

Acidic Precipitation

A form of precipitation, such as rain or snow, that contains high levels of hydrogen ions (low pH), often due to pollutants like sulfur dioxide and nitrogen oxides released into the atmosphere.