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on 05-Feb-2015 (Thu)

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Annotation 149651106

#asset-swap #finance #gale-using-and-tradning-asset-swaps
The par/par methodology therefore allows an investor to be exposed only to the idiosyncrasies of the bond issuer rather than taking interest rate risk - when you receive LIBOR based cashflows rather than fixed cashflows, there is no interest rate risk. (There is a small residual interest rate risk due to the difference between the discount factors based on the government curve and those based on the swaps curve.)
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Flashcard 149670429

Tags
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Question
The yield/yield asset swap spread investor makes money as the spread [widens or narrows?] since the bond yield falls relative to the swap rate.
Answer
widens

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The yield/yield asset swap spread investor makes money as the spread widens since the bond yield falls relative to the swap rate.

Original toplevel document (pdf)

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Flashcard 149670440

Tags
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Question
The yield/yield asset swap spread investor [makes or loses?] money as the spread widens since the bond yield falls relative to the swap rate.
Answer
makes

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The yield/yield asset swap spread investor makes money as the spread widens since the bond yield falls relative to the swap rate.

Original toplevel document (pdf)

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Flashcard 149670456

Tags
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Question
Par/par asset swap not being duration-hedged means that the P&L will vary with outright market level, i.e., the par /par spread is [...].
Answer
directional

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Par/par asset swap not being duration-hedged means that the P&L will vary with outright market level, i.e., the par /par spread is directional.

Original toplevel document (pdf)

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Flashcard 149670463

Tags
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Question
Par/par asset swap not being duration-hedged means that the P&L will [...] with outright market level, i.e., the par /par spread is directional.
Answer
vary

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Par/par asset swap not being duration-hedged means that the P&L will vary with outright market level, i.e., the par /par spread is directional.

Original toplevel document (pdf)

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Flashcard 149670470

Tags
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Question
Par/par asset swap not being duration-hedged means that the P&L will vary with [...], i.e., the par /par spread is directional.
Answer
outright market level

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Par/par asset swap not being duration-hedged means that the P&L will vary with outright market level, i.e., the par /par spread is directional.

Original toplevel document (pdf)

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Flashcard 149670494

Tags
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Question
The par/par methodology therefore allows an investor to be exposed only to the idiosyncrasies of the bond issuer rather than taking interest rate risk. Why no interest rate risk?
Answer
when you receive LIBOR based cashflows rather than fixed cashflows, there is no interest rate risk.

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The par/par methodology therefore allows an investor to be exposed only to the idiosyncrasies of the bond issuer rather than taking interest rate risk - when you receive LIBOR based cashflows rather than fixed cashflows, there is no interest rate risk. (There is a small residual interest rate risk due to the difference between the disc

Original toplevel document (pdf)

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