Question 1
Explain briefly LIBOR and OIS rates and then comment on the following: “2008 crisis showed us that LIBOR has its limitations. Please explain what went wrong with using LIBOR during the 2008 crisis and explain in detail why you think that using OIS rates instead of LIBOR rates would be more efficient and accurate?”
Question 2
Discuss the concept of the yield curve and explain how a yield curve is constructed. Discuss the various shapes a yield curve can take and briefly outline the market conditions that would lead to each shape.
Question 3
Clare is a portfolio manager for a US hedge fund based in New York. She heard recently that Apple is looking to issue a fixed coupon 5 years corporate bond in UK in GBP. She is interested in buying this bond, but she is worried that the FED may hike rates which will strengthen the dollar against all the other currencies. What would you advise Clare to do to hedge these risks if she goes ahead and buys the Apple bond?
No more than 500 words each question.
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