The Canadian dollar LIBOR rate is 0.5% higher than the U.S. LIBOR rate for all maturities. A
Question:
The Canadian dollar LIBOR rate is 0.5% higher than the U.S. LIBOR rate for all maturities.
A trader thinks that the spread between three-month U.S. LIBOR and three-month Canadian LIBOR will widen, but is unsure about how the exchange rate between the U.S. dollar and Canadian dollar will move. Explain how the trader could use a diff swap.
Why would the trader prefer a diff swap to a floating-for-floating currency swap?
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The trader could enter into a diff swap where interest is paid on a US dollar principal a...View the full answer
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Related Book For 
Fundamentals Of Futures And Options Markets
ISBN: 9781292422114
9th Global Edition
Authors: John Hull
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