金融英语第十五章答案.docVIP

Chapter 15 Exercises I. Answer the following questions in English. 1.What is swaps? A swap is an agreement between two parties to exchange sequences of cash flows for a set period of time 2.Where can swaps be changed? swaps occur on the OTC market 3.Who would use a swap? The motivations for using swap contracts fall into two basic categories:commercial needs and comparative advantage. The normal business operations of some firms lead to certain types of interest rate or currency exposures that swaps can alleviate. For example, consider a bank, which pays a floating rate of interest on deposits (i. e., liabilities) and earns a fixed rate of interest on loans (i. e.,assets ). This mismatch between assets and liabilities can cause trem- endous difficulties. Some companies have a comparative advantage in acquiring certain types of financing. However, this comparative advantage may not be for the type of financing desired. In this case, the company may acquire the financing for which it has a comparative advantage, then use a swap to convert it to the desired type of financing. 4.what is an interest swaps? In This swap, Party A agrees to pay Party B a predetermined, fixed rate of interest on a notional principal4 on specific dates for a specified period of time. Concurrently, Party B agrees to make payments based on a floating interest rate to Party A on that same notional principal on the same specified dates for the same specified time period 5.What does comparative advantage mean? During the life of the swap, the same valuation technique is used, but since,over time, the forward rates change, the PV of the variable-rate part of the swap will deviate from the unchangeable fixed-rate side of the swap. Therefore, the swap will be an asset to one party and a liability to the other. The way these changes in value are reported is the subject of IAS 39 for jurisdictions f