[almena]

Thank you I understand that now

[almena]

Sorry back to the IRG

If I was to use an IRG am I right in thinking that you do not actually buy an IRG but take out an option on an FRA. Is the term IRG just used to differentiate it as an over the counter option as opposed to exchange traded options.

So if i wanted to hedge against interest rate fall on a deposit – i would take out an OTC PUT option to buy an FRA
If I wanted to hedge against interest rate increase on a loan – I would take out an OTC CALL option to sell an FRA

To put this in very basic terms – when they say over the counter you picture in your head a person standing behind a counter(well that’s my simplistic thought pattern) So I approach this person with a view to protecting the interest rate on my future deposit and say ‘I would like to take out a PUT option to buy an FRA’ No mention of IRG???
Is that correct?

[almena]

Thank you. for your response
I think it is the terminology i am not getting with IRG’s
So for instance if I decided to hedge against an interest rate fall on a deposit and I wanted to use an IRG…. do I buy an IRG? The deeper I delve the more confused I am getting.

[almena]

Thank you. So really the point i got up to was correct then I just needed to divide by 2 year cumulative to get the EAC. I was not sure how to get EAC but understand now

[almena]

Hi Well done on passing your exam.Would you mind me asking did you use any additional study materials as well as open tuition?

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