For anyone who used the lock-in rate method for futures (which is fine!) - you should get the same answer: Lock in rate = 100 - (futures price + unexpired basis) 100 - (93.35 + 0.09) = 6.56% As they borrow at 0.2% above base rate, they will pay 6.56% + 0.2% = 6.76% for 5 months 6.76% * 21,000,000 * 5/12 = 591,500 (same as the full working)
I hope you all now love hedging as much as me!
Practice certainly makes perfect - keep doing questions and you will master it.
Thank you for the video! This helps me understand interest rate FRA, future and swap immediately (other than options)!
@kira0896 No problem - hedging is great once you know how! Good luck with the exam 😁
Nice explanation and simple
For anyone who used the lock-in rate method for futures (which is fine!) - you should get the same answer:
Lock in rate = 100 - (futures price + unexpired basis)
100 - (93.35 + 0.09) = 6.56%
As they borrow at 0.2% above base rate, they will pay 6.56% + 0.2% = 6.76% for 5 months
6.76% * 21,000,000 * 5/12 = 591,500 (same as the full working)
Can the format used for interest rate swap also be used for currency swap?
lovely❤
This guy is great, has an unparalleled quality. Thanks🫡🌟
Many thanks!