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You have a USD loan that is priced at 3-month LIBOR+50. LIBOR for the loan will be re-fixed in exactly one month. The market is quoting:
1x3 USD FRA. 1.95-98%
1x4 USD FRA. 2.07-10%
1x6 USD FRA 2.25-28%
To hedge the next LIBOR fixing, you should:
A. Buy a 1x4 FRA at 2.10%
B. Sell a 1x4 FRA at 2.10%
C. Sell a 1x3 FRA at 1.95%
D. Buy a 1x3 FRA at 1.98%
Answer: A
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Reference:
http://docs.adobe.com/docs/en/cq/5-6-1/developing/widgets.html
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A. Option B
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