How swaps arrangements can be used to manage risks

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(a) The Manager of an Exchange Traded Fund (ETF) tracking the LuSE Select Share index observes that the market price of the ETF ccomprising; Pamodzi, CEC, MTN, ZANACO and ZAMBEEF is 5% below its net asset value. The Manager wants to reduce this difference.

Explain how such an ETF might be constructed and how the Manager could take to bring the price of the ETF back into line with its net asset value.

(b) Explain how swaps arrangements can be used to manage risks faced by Zambia borrowers, lenders and investors in any three circumstances. Include diagrams and cashflows where possible.

Reference no: EM133205250

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