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interest rate risk- Futures n options

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › interest rate risk- Futures n options

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.
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  • December 4, 2013 at 5:17 pm #150254
    diannel2012
    Member
    • Topics: 18
    • Replies: 37
    • ☆☆

    when explaining

    interest rate Futures and Option, is the concept identical to Exchange rate Futures and options??

    December 4, 2013 at 5:31 pm #150271
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54681
    • ☆☆☆☆☆

    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)

    December 5, 2013 at 3:41 am #150429
    diannel2012
    Member
    • Topics: 18
    • Replies: 37
    • ☆☆

    how about “swap” sir…can u explain the implication please for both FX risk and Interest rate risk

    December 5, 2013 at 10:36 am #150596
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54681
    • ☆☆☆☆☆

    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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