A swap dealer is a net floating-rate payer and net fixed-rate receiver. The dealer can hedge this position by:

Select one:

a. unwinding some positions where the dealer is fixed-rate payer.

b. unwinding some positions where the dealer is floating-rate receiver.

c. finding another counterparty that wishes to receive floating-rate and pay fixed-rate.

d. taking a short position in a strip of interest rate futures.

e. taking a long position in a strip of interest rate futures.

Q.2) A swap dealer's quoted mid-rate for an on-market plain vanilla swap

Select one:

a. is the floating rate to be paid by the dealer.

b. is the fixed rate to be paid by the dealer.

c. is the fixed rate the dealer will receive.

d. is the floating rate the dealer will receive.

e. none of the above.

Q.3) In an interest rate swap, the risk of the fixed-rate receiver defaulting:

Select one:

a. decreases as interest rates rise.

b. is unaffected by changes in interest rates.

c. is lower when the yield curve is upward sloping compared to when it is downward sloping.

d. is greater when the yield curve is upward sloping compared to when it is downward sloping.

e. is unaffected by the slope of the yield curve.