Which of the following is correct about interest rate futures contracts?

Buyers of futures contracts make a profit when prices rise.

Buyers of futures contracts make a profit when interest rates rise.

Sellers of futures contracts make a profit when prices rise.

Sellers of futures contracts make a profit when prices interest rates fall.

b. and d.

Which of the following would require a short hedge?

The bank anticipates a decline in interest rates.

The bank has a positive GAP.

The bank is liability sensitive.

All of the above require a short hedge.

None of the above require a short hedge

A credit default swap:

transfers the credit risk in a fixed income instrument from one counterparty to another.

is not considered a credit derivative.

provides the buyer with periodic payments.

can only be traded if the seller owns the underlying instrument.

all of the above.

How can a bank hedge when it makes 1-year fixed-rate loans and finances them with 3-month floating-rate deposits?

Buy Eurodollar futures contracts.

Sell put options on Eurodollar futures contracts.

Sell Eurodollar futures contracts.

Buy call options on Eurodollar futures contacts.

b. and c.