FoundationMultiple choice
You enter a swap paying fixed and receiving floating. Which position is it economically equivalent to, and when do you gain?
- ALong a fixed-rate bond and short a floater; you gain when rates fall
- BShort a fixed-rate bond, long a floater; you gain when rates rise
- CLong both a fixed-rate bond and a floater, so the position has no exposure to rates
- DShort an equity index; you gain when stocks fall and rates are irrelevant
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