1) Consider the spot exchange rate S(EUR/USD) = 1.2350/70 and the swap quotation for the forward rate F30 days (EUR/USD)
Posted: Mon Apr 25, 2022 8:42 am
1) Consider the spot exchange rate S(EUR/USD) =
1.2350/70 and the swap quotation for the forward rate F30 days
(EUR/USD) to be 20/10.
a) Is the EUR at forward premium, discount, or par?
b) What is the outright quotation for this forward exchange
rate?
2) Explain what is arbitrage and the distinction
between triangular and spatial arbitrage
3) Regarding convertible bonds:
a) What is the “bond floor”?
b) What is the value of the embedded option?
c) What is a “call protection” clause?
1.2350/70 and the swap quotation for the forward rate F30 days
(EUR/USD) to be 20/10.
a) Is the EUR at forward premium, discount, or par?
b) What is the outright quotation for this forward exchange
rate?
2) Explain what is arbitrage and the distinction
between triangular and spatial arbitrage
3) Regarding convertible bonds:
a) What is the “bond floor”?
b) What is the value of the embedded option?
c) What is a “call protection” clause?