An Existing Swap Can Be Effectively Hedged Against Interest Rate

question 68

Multiple Choice

An existing swap can be effectively hedged against interest rate risk by

• A)selling out to another party.
• B)entering into another swap agreement that is the mirror image of the original swap.
• C)setting interest sensitive assets equal to interest sensitive liabilities.
• D)setting asset duration equal to liability duration.

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Definitions:

Perfection

In legal and finance contexts, the act of securing a priority interest in collateral to protect a secured loan or transaction.

Certificate of Deposit

A savings certificate entitling the bearer to receive interest, which has a fixed maturity date, and typically restricts withdrawal of funds before that date.

Breached the Peace

Breaching the peace refers to causing a disturbance or acting in a manner that disrupts public order or tranquility, often leading to legal penalties.

Public Lot

A plot of land owned by a governmental entity and made available for public use or development.