Problem 1. How can swaps be used to reduce the risks associated with debt contracts?
Problem 2. Investors could use futures contracts and swap contracts. Of the two types of contracts, which one has a higher default risk? Why?
Problem 3. What is the difference between hedging and speculating?
Problem 4. An issue that comes up in hedging is the risk, especially when cross hedging. Why does cross-hedging lead to basis risk?
Problem 5. The forward and future markets are regulated. What agency is the chief regulator of futures markets? Why is federal regulation necessary?