Interest Rates in the key currency blocs – USD, EUR, GBP, JPY – along with related currencies (CHF, SEK, DKK etc) are historically low. Both short-term rates (Libor) and long-term bond rates are very low. Actually, a lot of fixed rate investments (bonds) trade at negative interest rates.
a. What may be reasons for this situation? Limit yourself to stating 3 reasons. Give a very short rationale for each (1 or 2 sentences).
b. How is this low or even negative interest rate environment impacting the market for financial derivatives particularly for interest rates, stocks and foreign exchange?