What is credit default swap

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Reference no: EM133578774

Questions

1. Can both sides profit from an interest rate swap? Explain your reasoning.

2. How is a repurchase agreement used by banks, companies, and the Federal Reserve? How does the Federal Reserve use repos to increase the money supply?

3. What is the Secured Overnight Financing Rate? How is it related to LIBOR? How is it used? Give an example.

4. Alphabet has a large cash position. Calculate the interest earned on an overnight repurchase agreement annually. If this were done every day for a year, how much interest would the company earn? Is this worthwhile for the company? Use the most recent quarterly statements.

5. What is a credit default swap? How is it used for asset backed securities? What is the risk to the insurance company?

6. What is a currency swap? Under what conditions would you recommend a currency swap in Europe for a US company today? Consider the value of the dollar in the answer.

7. Overall, are the benefits worth the cost of derivatives? Why or why not?

Reference no: EM133578774

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