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    Soal PPM

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    presti.dewi.intan-2021
    Banks have used credit default swaps (CDS) in the following ways: - To transfer credit risk exposure from loans and bonds on their balance sheets. By purchasing CDS protection, banks can insure against losses if a borrower defaults. This allows banks to free up capital. - To speculate on credit quality. Banks can take long or short positions in CDS to bet on whether a borrower's credit will improve or deteriorate. - To synthetically create exposure without extending credit. Banks can gain exposure to a borrower and earn the spread on CDS contracts without actually lending to or investing directly in that borrower. This allows banks to diversify their portfolios. - To hedge credit portfolios. Banks can

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    Soal PPM

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    Banks have used credit default swaps (CDS) in the following ways: - To transfer credit risk exposure from loans and bonds on their balance sheets. By purchasing CDS protection, banks can insure against losses if a borrower defaults. This allows banks to free up capital. - To speculate on credit quality. Banks can take long or short positions in CDS to bet on whether a borrower's credit will improve or deteriorate. - To synthetically create exposure without extending credit. Banks can gain exposure to a borrower and earn the spread on CDS contracts without actually lending to or investing directly in that borrower. This allows banks to diversify their portfolios. - To hedge credit portfolios. Banks can

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    Banks have used credit default swaps (CDS) in the following ways: - To transfer credit risk exposure from loans and bonds on their balance sheets. By purchasing CDS protection, banks can insure against losses if a borrower defaults. This allows banks to free up capital. - To speculate on credit quality. Banks can take long or short positions in CDS to bet on whether a borrower's credit will improve or deteriorate. - To synthetically create exposure without extending credit. Banks can gain exposure to a borrower and earn the spread on CDS contracts without actually lending to or investing directly in that borrower. This allows banks to diversify their portfolios. - To hedge credit portfolios. Banks can

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    36 views3 pages

    Soal PPM

    Uploaded by

    presti.dewi.intan-2021
    Banks have used credit default swaps (CDS) in the following ways: - To transfer credit risk exposure from loans and bonds on their balance sheets. By purchasing CDS protection, banks can insure against losses if a borrower defaults. This allows banks to free up capital. - To speculate on credit quality. Banks can take long or short positions in CDS to bet on whether a borrower's credit will improve or deteriorate. - To synthetically create exposure without extending credit. Banks can gain exposure to a borrower and earn the spread on CDS contracts without actually lending to or investing directly in that borrower. This allows banks to diversify their portfolios. - To hedge credit portfolios. Banks can

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    Ch 14.1- Ch 14.

    1. Writing Call Options A call option on Illinois stock specifies an exercise price of $38.
    Today, the stock’s price is $40. The premium on the call option is $5. Assume the
    option will not be exercised until maturity, if at all. Complete the following table:
    Assumed Stock Price at The Net Profit or Loss Per Share to be a
    Time Call Option is About to Earned by The Writer (Seller) of The Call
    Expire Option
    $37 $5
    39 $4
    41 $2
    43 $0
    45 $-2
    48 $-5
    2. Purchasing Call Options A call option on Michigan stock specifies an exercise price
    of $55. Today, the stock’s price is $54 per share. The premium on the call option is
    $3. Assume the option will not be exercised until maturity, if at all. Complete the
    following table for a speculator who purchases the call option:
    Assumed Stock Price at The Net Profit or Loss Per Share to be a
    Time Call Option is About to Earned by The Writer (Seller) of The Call
    Expire Option
    $50 $-3
    52 $-3
    54 $-3
    56 $-2
    58 $0
    60 $2
    62 $4
    3. Purchasing Put Options A put option on Iowa stock specifies an exercise price of $71.
    Today, the stock’s price is $68. The premium on the put option is $8. Assume the
    option will not be exercised until maturity, if at all. Complete the following table for a
    speculator who purchases the put option (and currently does not own the stock):
    Assumed Stock Price at The Net Profit or Loss Per Share to be a
    Time Call Option is About to Earned by The Writer (Seller) of The Call
    Expire Option
    $60 $3
    64 $-1
    68 $-5
    70 $-7
    72 $-8
    74 $-8
    76 $-8
    Ch15
    3.Role of Securities Firms in Swap Market. Describe the possible roles of securities firms
    in the swap market.
    Peran dari Securities Firms pada swap market diantaranya yakni sebagai perantara atau
    intermediary dalam mencocokkan dua pihak yang terlibat dalam pertukaran swap dan
    berperan sebagai dealer yang mengambil posisi counterparty dalam mengakomodasi pihak
    yang akan melakukan swap
    13. Use of Interest Rate Swaps. Explain why some companies that issue bonds engage in
    interest rate swaps in financial markets. Why do they not simply issue bonds that
    require the type of payments (fixed or variable) that they prefer to make?
    Ketika menerbitkan obligasi, perusahaan berisiko harus membayar premi dengan suku bunga
    tetap yang lebih tinggi daripada suku bunga variable sehingga perusahaan lebih suka
    menerbitkan obligasi tingkat variable walaupun melakukan pembayaran tetap. Untuk itu,
    interest rate swap memungkinkan perusahaan untuk menerima arus masuk tingkat variable
    yang digunakan untuk menutupi pembayaran kepada pemegang obligasi dan arus keluar
    tingkat tetap yang digunakan untuk melakukan pembayaran kepada pemegang obligasi. Hal
    ini juga memungkinkan adanya pertukaran pembayaran suku bunga variable dengan
    pembayaran suku bunga tetap dalam menerbitkan obligasi.
    14. Use of Currency Swaps. Explain why some companies that issue bonds engage in
    currency swaps. Why do they not simply issue bonds in the currency that they would
    prefer to use for making payments?
    Perusahaan bisa saja berada di negara yang tidak mengenal obligasi dengan denominasi mata
    uang tertentu sehingga diperlukan currency swaps agar perusahaan bias menerbitkan obligasi
    di Negara lain dalam denominasi mata uang yang berbeda. Dengan begitu, perusahaan dapat
    menukar mata uang apapun yang biasanya diterima dalam arus kas masuk dengan mata uang
    yang diperlukan untuk melakukan pembayaran kupon atau pokok obligasi.
    1. Vanilla Swaps Cleveland Insurance Company has just negotiated a three-year plain
    vanilla swap in which it will exchange fixed payments of 8 percent for floating payments
    of LIBOR plus 1 percent. The notional principal is $50 million. LIBOR is expected to be
    7 percent, 9 percent, and 10 percent (respectively) at the end of each of the next three
    years.
    a. Determine the net dollar amount to be received (or paid) by Cleveland each year.
    Years
    1 2 3
    LIBOR 7% 9% 10%
    Floating Rate received 8% 10% 11%
    Fixed rate paid 8% 8% 8%
    Swap differential 0% 2% 3%
    Net dollar amount $0 $1.000.000 $1.500.000
    received based on
    principal of $50 million

    b. Determine the dollar amount to be received (or paid) by the counterparty on this
    interest rate swap each year based on the assumed forecasts of LIBOR.
    Year 1 = $0; Year 2 = $1.000.000 terbayar; dan Year 3 = $1.500.000 terbayar
    Ch-17
    1. Bank Balance Sheet
    Create a balance sheet for a typical bank, showing its main liabilities (sources of funds) and
    assets (uses of funds).
    2. Bank Sources of Funds
    What are four major sources of funds for banks? What alternatives does a bank have if it
    needs temporary funds? What is the most common reason that banks issue bonds?
    14. Bank Use of Credit Default Swaps
    Explain how banks have used credit default swaps.

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