a) The interest rates being exchanged in a plain vanilla currency swap must not be equal in both currencies. b) Short positions on forward rate agreements (FRAS), as well as long positions on interest rate futures hedge against falling interest rates. c) The theoretical estimation accuracy of VaR for portfolios of options is higher when using the quadratic model instead of the linear model. d) Implied volatilities used in option pricing are based more on estimates of future volatility than on historical volatility. e) The price decline of an underlying asset increases the amount of margin required from the writer of the ITM (i.e., in the money) put on the same asset. f) The costs stemming from hedging against foreign exchange risk are lower when currency forwards instead of currency options are used for this purpose. g) A call option to buy Singapore dollars at strike price of 10 South African rands is equal to a put option to sell 10 South African rands at strike price of 0.1 Singapore dollars, given that the options have the same maturity. h) Back-testing indicates how well the Value-at-Risk (VaR) estimates have performed in the past. For example, if the back-testing shows that 10-day 95% VaR has been exceeded in 25 days during the last two years, the VaR estimate can be considered relatively reliable. Based on the yield spreads, the corporate bor narket seems to underestimate default probabilities, since the so-called risk-neutral default probabilities are generally much lower than the real-world default probabilities. j) A three-month bond futures price must always be higher than the current spot price of the underlying bond. 1 TRUE FALSE a b d e f g h