You Have Entered into a Swap Where You Receive the Fixed

question 11

Multiple Choice

You have entered into a swap where you receive the fixed rate and pay the floating rate.What is the best way to hedge interest-rate risk in this swap from among the following choices?

• A)Add a long position in fixed rate bonds.
• B)Add a short position in interest-rate futures.
• C)Add a basis (i.e. ,floating-floating)swap.
• D)Add a short position in FRAs.

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Definitions:

High Self-Esteem

High Self-Esteem refers to an individual's positive evaluation of self-worth and confidence in their own abilities.

Future Obligation

Commitments or responsibilities that are anticipated or required to be fulfilled in the future.

Materialistic Ideals

The belief that material wealth and physical possessions are the primary indicators of success or happiness.

Industrial Revolution

A period of major industrialization from the late 18th to early 19th century that transformed agriculture-based societies into industrialized ones.