Why Were Inverse Floaters Developed

question 21

Multiple Choice

Why were inverse floaters developed?

• A)To exchange specified periodic cash flows in the future based on some underlying instrument.
• B)To better manage their interest rate, foreign exchange, and credit risks of corporate enterprises.
• C)To lower the cost of financing for government agencies.
• D)To determine payments and timing of payments when there is no standardized contract.
• E)To keep the swap market liquid by locating or matching counterparties.

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Definitions:

Stagflation

A condition of slow economic growth and relatively high unemployment—a period of stagflation—accompanied by rising prices (inflation).

Misery Index

An economic indicator created by summing the unemployment rate and inflation rate, aiming to provide a snapshot of the average citizen's economic well-being.

Unemployment Rate

The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

Employed

Employed refers to individuals who are working for pay or profit, engaging in a job or business, within a stipulated period.