最新版HullFund8eCh07ProblemSolutions解析（全）.docxVIP

精品文档，知识共享! 精品文档，知识共享! CHAPTER 7Swaps Practice Questions Problem 7.8. Expla in why a bank is subject to credit risk whe n it en ters into two offsetti ng swap con tracts. At the start of the swap, both con tracts have a value of approximately zero. As time passes, it is likely that the swap values will change, so that one swap has a positive value to the bank and the other has a n egative value to the ban k. If the coun terparty on the other side of the positive-value swap defaults, the bank still has to honor its con tract with the other counterparty. It is liable to lose an amount equal to the positive value of the swap. Problem 7.9. Compa nies X and Y have bee n offered the follow ing rates per annum on a $5 milli on 10-year inv estme nt: Fixed Rate Floati ng Rate Compa ny X 8.0% LIBOR Compa ny Y 8.8% LIBOR Compa ny X requires a fixed-rate inv estme nt; compa ny Y requires a floati ng-rate in vestme nt. Desig n a swap that will net a bank, act ing as in termediary, 0.2% per annum and will appear equally attractive to X and Y. The spread betwee n the in terest rates offered to X and Y is 0.8% per annum on fixed rate investments and 0.0% per annum on floating rate investments. This means that the total appare nt ben efit to all parties from the swap is 0.8% per annum. Of this 0.2% per annum will go to the bank. This leaves 0.3% per annum for each of X and Y. In other words, compa ny X should be able to get a fixed-rate retur n of 8.3% per annum while compa ny Y should be able to get a float in g-rate return LIBOR + 0.3% per annum. The required swap is show n in Figure S7.1. The bank earns 0.2%, compa ny X earns 8.3%, and compa ny Y earns LIBOR + 0.3%. Figure S7.1 Sw ap for Problem 7.9 Problem 7.10. A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per annum and pays six-m onth LIBOR on a prin cipal of $10 milli on for five years. Payme nts are made every six mon ths. Suppose that compa ny X d