What do we mean by euro-currency market

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Q1. What do we mean by Euro-currency Market, and what financial instruments do that term collectively describe? Does only Euro denominated instruments available in this market, or are instruments in other currencies? Discuss why these markets exist, the scope and size of the market, where they are located, and who participates in them?

Q2. Explain how firms can take advantage of comparative and absolute advantages in different credit markets using currency swap agreements?

Explain how firms can take advantage of comparative and absolute advantages in different credit markets using currency swap agreements?

Q3. Explain the role of a swap dealer.

Q4. Bank 1 can issue five-year CDs at an annual rate of 11 percent fixed or at a variable rate of LIBOR plus 2 percent. Bank 2 can issue five-year CDs at an annual rate of 13 percent fixed or at a variable rate of LIBOR plus 3 percent.

a. Does a mutually beneficial swap possible between the two banks?

b. Where is the comparative advantage of the two banks?

c. How can swaps be used as an interest rate hedge in this example?

Reference no: EM133154941

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