5.11 Financial institution is Involved (Figure 5.4, page 126) 4.985 5.015 A B LIBOR+0.8% LIBOR LIBOR Plain vanilla fixed-for-float swaps on US interest rates are usually structured so that the financial institutions earns 3 to 4 basis points on a pair of offsetting transactions Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal University
Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 5.11 Financial Institution is Involved (Figure 5.4, page 126) A F.I. B LIBOR LIBOR LIBOR+0.8% 4.985% 5.015% 5.2% “Plain vanilla” fixed-for-float swaps on US interest rates are usually structured so that the financial institutions earns 3 to 4 basis points on a pair of offsetting transactions
5.12 A and b transform an asset (Figure 5.3, page 125) 5%0 4.7% B LIBOR-0.25% LIBOR Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal University
Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 5.12 A and B Transform an Asset (Figure 5.3, page 125) A B LIBOR 5% LIBOR-0.25% 4.7%
5.13 Financialinstitution is Inⅴ olved (See Figure 5.5, page 126 4.985% 5.015 4.7 A EI B LIBOR-0.25% LIBOR LIBOR Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal University
Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 5.13 Financial Institution is Involved (See Figure 5.5, page 126) A F.I. B LIBOR LIBOR 4.7% 4.985% 5.015% LIBOR-0.25%
5.14 The Comparative Advantage Argument(Table 5.4, page 129) Company A wants to borrow floating Company b wants to borrow fixed Fixed Floating Companya 10.00% 6-month LIBOR+0.30% Company b 11.20% 6-month LIBOR+ 1.00% Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal University
Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 5.14 The Comparative Advantage Argument (Table 5.4, page 129) • Company A wants to borrow floating • Company B wants to borrow fixed Fixed Floating Company A 10.00% 6-month LIBOR + 0.30% Company B 11.20% 6-month LIBOR + 1.00%