medium · FRM Part 1 Financial Markets and Products
A corporate treasurer wants to hedge a $100 million floating-rate loan that resets quarterly.
If the treasurer uses a 2-year swap, they are essentially:
- Buying 24 monthly FRAs.
- Entering into a strip of 8 consecutive FRAs.
- Selling a 2-year fixed-rate bond.
- Buying 8 quarterly Eurodollar futures contracts.
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