Is it in Dave note ? I cant seem to find it. As far as I know, any economic model with mean reversion means oscillating around mean. As shown in this example http://seekingalpha.com/article/176726-economic-bull-that-mean-mean-reversion-is-still-coming
The one I chose is the one ossilating around the mean. That is the property of mean reversion I think. Not just falling to mean and stay constant or moving away from the mean.
I dont recall that the question says anything about the floating leg was quarterly and fixed was semi-annual. Instead remember vaguely it said both are quarterly payment. But I am quite sure netting will affect the number of payment since the questions says the swap follows ISDA standard...
I chose fiduciary as well but now read BT note again about this and it says: The trustee acts in a fiduciary capacity on behalf of the investors. i.e. bond holders I guess. And The trustee must ensure that the bond issuer is in compliance with the covenants of the indenture at all times..So it...
Can you explain why it is 9 quarterly payment and 5 semiannual payment when the contract is only 2 years ? which means only 8 quarters in total and the payment is netted between 2 counterparties in each payment no ?
1. Yes I got 0.85% for that one as well. I used different method to derive it..tree method as I learn it in my uni.
2. I am not sure about this question as well. neva seen it in the reading..the length of the swap is 2 years with quarterly payment. so I choose 7 since the start date of the fixed...
There is also one question about unlevered/level beta where they increase the debt/equity ratio from 1 to 2 and decrease tax rate from 25% to 15%. Original levered beta is 1.75, unlevered beta is 1. So I plug the number in (1+(1-0.15)*2) and got 2.75..which is none of the answer :( anyone solved...
Yes there are also a few questions giving you both Inflation rate and Real rate so I guess they expect you to use Nominal Rate = (1+Inflation)(1+Real) for the calculation.
Some IRS questions are tricky. One quesiton where The fixed payment is annually but the float payment is semi-annually and...
There is one question when they gave the computed B1 and B2 t-stats value (1.64 and 2.33) and asks to compute F stats and determine if it is significant at 95% (reject and accept the Null Hypothesis that B1=0 and B2=0)..I dont know how to compute F stats from B1 and B2 so I make a guess that if...
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