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Sir
Buying both an interest rate cap and an interest rate floor is an example of interest rate collar right ?But sir it depends on the person. If he is borrower he will buy a cap sell a floor
And if he is a depositor he will sell a cap and buy a floor
Right ?
So I thought the statement is wrongThey buy or sell options in order to create the cap and the floor, but the mechanics of it are not examinable until Paper AFM. The statement is a fair simple explanation of the idea.
Sir, the Interest rate future hedge can be closed out any time is correct sir?
John Moffat wrote:Sir
Buying both an interest rate cap and an interest rate floor is an example of interest rate collar right ?Sir in the exam I got these two option:
One of them is quoted sentence (Buying both interest rate cap and floor is example of interest rate collar) and (Interest rate is future hedge can be closed out any time) from the four options. Which is mostly correct one sir?The second one, as is explained in my free lectures. But please do not expect me to answer any more question from an exam that I have not seen.
Hi master
under risk management
do we have a range of close out dates only
In interest rate options
OrBoth in interest rate options and interest rate futures
With interest rate options you decide whether or not to exercise on a fixed date.
With futures you can close out the deal at any time up until the maturity date of the future.
1. So that means interest rate futures hedges can be closed out any time in relation to interest rate derivatives.
2. And secondly in relation to currency options and currency futures.
currency options are based on a fixed date (that is whether or not to e fee use on a fixed date) as well ?
And currency futures the deal can be closed out any time up until the maturity of the future
Correct sir?
1. Futures are derivatives, and they can be closed out at any time up to the date of maturity.
2. What you have written is correct 🙂
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