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when explaining
interest rate Futures and Option, is the concept identical to Exchange rate Futures and options??
Yes, although make sure you are clear about the risk that we are talking about.
(and remember that you cannot be asked for calculations on interest rate risk – only discussion)
how about “swap” sir…can u explain the implication please for both FX risk and Interest rate risk
I am not sure that swaps can actually be asked in the exam (because they are not derivatives).
Interest rate swaps are a way of switching between floating rate borrowing and fixed rate borrowing (or vice versa) and are done to save interest – not to really reduce risk. The same applies to currency swaps.
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