ACI
3I0-012 · Question #342
If you funded your fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?
The correct answer is A. Pay fixed and receive floating through swaps for the term of the portfolio. See the full explanation below for the reasoning.
Question
If you funded your fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?
Options
- APay fixed and receive floating through swaps for the term of the portfolio
- BPay floating and receive fixed through swaps for the term of the portfolio
- CYou cannot: the maturity of the swaps would be longer than that of the deposits
- DYou should not: there would be too much basis risk
How the community answered
(32 responses)- A78% (25)
- B3% (1)
- C6% (2)
- D13% (4)
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