CFA level2 derivatives 질문입니다!
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8월 레벨2 시험 준비중에 MOCK exam 풀다가 이해가 되지 않는 것이 있어서 질문드립니다
Matthew Riley Case Scenario
Matthew Riley is a managing director in the Derivatives Group at Stone Ridge Capital Partners (SRCP). Riley specializes in advising clients on the use of derivatives to manage portfolio management strategies. Riley is preparing to meet with four of the firm’s clients: Kaeun Kim, Erin Cline, Rahul Mehta, and Michael Mensah.
Three months ago (90 days), Kim purchased a bond with a 3% annual coupon and a maturity date of seven years from the date of purchase. The bond has a face value of US$1,000 and pays interest every 180 days from the date of issue. Kim is concerned about a potential increase in interest rates over the next year and has approached Riley for advice on how to use forward contracts to manage this risk. Riley advises Kim to enter into a short position in a fixed-income forward contract expiring in 360 days. The annualized risk-free rate now is 1.5% per year and the price of the bond with accrued interest is US$1,103.45.
One month ago (30 days), Cline entered a pay floating 3 × 6 forward rate agreement (FRA) at a rate of 2.31% with a notional amount of US$5,000,000. At the time, the three-month LIBOR was 1.28% and the six-month LIBOR was 1.8%. Now, 30 days after entering the FRA, two-month LIBOR is 1.5% and the five-month LIBOR is 2.5%.
Mehta, who is based in Hong Kong SAR and requires a €25,000,000 one-year bridge loan to fund operations in Germany. He wants to fund this loan at a competitive rate. Riley advises Mehta to borrow in HK dollars and enter into a one-year foreign currency swap to swap into euros. The current exchange rate is HK$9.15 per euro. Exhibit 1 below provides Hong Kong and euro spot interest rates and present value factors.
Exhibit 1:
Hong Kong and Euro Spot Interest Rates
| Days to Maturity |
HK Dollars Spot Interest Rates (%) |
HK Dollars Present Value Factors |
Euro Spot Interest Rates (%) |
Euro Present Value Factors |
| 90 | 0.610 | 0.9985 | 0.372 | 0.9991 |
| 180 | 0.765 | 0.9962 | 0.422 | 0.9979 |
| 270 | 0.850 | 0.9937 | 0.448 | 0.9967 |
| 360 | 0.935 | 0.9907 | 0.468 | 0.9953 |
Michael Mensah is based in Australia and entered into a one-year equity swap 30 days ago. Under the terms of the swap, he would receive the return on the S&P/ASX 300 Metals and Mining Index and pay a fixed annual interest rate of 4.8% on a notional amount of AUD75,000,000. The swap payments are quarterly. At the time the swap was initiated 30 days ago, the value of the S&P/ASX 300 index was 3,250. Today, the value of the S&P/ASX 300 index is 3,738. Exhibit 2 provides present value factors based on the current Australian terms structure of interest rates.
Exhibit 2:
Present Value Factors Based on Current Australian Term Structure
| Days to Maturity | Present Value Factors |
| 60 | 0.9976 |
| 150 | 0.9924 |
| 240 | 0.9861 |
| 330 | 0.9696 |
Based on the information in Exhibit 1, the annual fixed swap rate Mehta would pay is closest to:
-
0.48%.
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0.92%.
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1.88%.
B is correct. PV factors for euros are provided along with an explanation of how they are calculated:
| Maturity (Days) | PV Factor |
| 90 | 0.9991 |
| 180 | 0.9979 |
| 270 | 0.9967 |
| 360 | 0.9953 |
For example, PV(90) is calculated as follows:
11+0.003721×(90360)=0.99111+0.003721×90360=0.991
Other present value factors are calculated in a similar manner.
The fixed rate is calculated as follows:
1.0−PV0,t4Euro(1)∑4i=1PV0,tiEuro(1)1.0−PV0,t4Euro1∑i=14PV0,tiEuro1
1.0−0.99070.9985+0.9962+0.9937+0.9907=0.00231.0−0.99070.9985+0.9962+0.9937+0.9907=0.0023
The annualized rate = 0.0023 × 4 = 0.0092
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