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NEW QUESTION: 1
An investor in mortgage backed securities can hedge his/her prepayment risk using which of the following?
I. Long swaption
II. Short cap
III. Short callable bonds
IV. Long fixed/floating swap
A. I and III
B. I and IV
C. II and III
D. II and IV
Answer: A
Explanation:
Explanation
Mortgage backed securities carry prepayment risk as borrowers tend to prepay mortgages when rates fall, and substitute it with newer cheaper mortgages. This creates the issue of 'negative convexity' for mortgages, ie, they lose value when rates rise, but do not gain in value when rates fall.
Prepayment risk can be offset by instruments that also carry negative convexity. A swaption is an option to borrow in the future at an agreed rate, which may be fixed or floating. An option to borrow in the future paying floating and receiving fixed guards against losses when rates fall, as the option can be exercised for a profit when rates are declining and the mortgage portfolio is being prepaid. A callable bond is very similar to an MBS in that the issuer can call it back when rates fall. Thus a long position in an MBS can be offset by a short position in a callable bond. Thus I and III are valid choices.
A cap allows exchanging fixed for floating when interest rates rise above an agreed rate. A long cap position allows borrowing at a fixed rate in exchange for floating, and a short cap implies receiving fixed and paying floating when rates go above the strike rate. Prepayment risk arises from falling interest rates, therefore a short cap will not protect against such a risk as falling interest rates would mean that no payments would be exchanged. Thus II does not help hedge against the risk in question.
A long position in a fixed for floating swap would require paying fixed and receiving floating when rates are falling. This would just make the problem from prepayments worse as the position would pay fixed and receive a falling rate. Thus IV is not an appropriate way to hedge prepayment risk.
NEW QUESTION: 2
A. Premium Storage virtual hard disk (VHD)
B. Standard Storage Blob storage
C. Standard Storage virtual hard disk (VHD)
D. Premium Storage Blob storage
Answer: A,D
Explanation:
Explanation: Azure Premium Storage delivers high-performance, low-latency disk support for virtual machines (VMs) with input/output (I/O)-intensive workloads. VM disks that use Premium Storage store data on solid-state drives (SSDs). To take advantage of the speed and performance of premium storage disks, you can migrate existing VM disks to Premium Storage.
NEW QUESTION: 3
Click the Exhibit button.
From the output shown in the exhibit, what would happen to a packet destined for address 172.29.3.5?
A. The address is in the aggregate range; the packet will be dropped.
B. The address is not in the aggregate range; the packet will be forwarded.
C. The address is in the aggregate range; the packet will be silently dropped.
D. The address is not in the aggregate range; the packet is sent to the Routing Engine.
Answer: A
NEW QUESTION: 4
Which describes the non-blocking architecture deployed in M-series switches?
A. Switch operations which move data across the bus into CMM and finally to MPC for delivery
B. Memory based operations which fence partitions of memory into bit-buckets for data delivery
C. Allows frames to be sent to destination ports based on the receiving ports availability
D. Allows memory segmentation across the s/bar platform permitting data re-direction based on ASIC availability
Answer: C