Multiple choice

Interest Rate Risk for an Indian debt fund can be reduced by using

  1. futures

  2. options

  3. interest tate swaps

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest rate swaps are derivative instruments that allow fixed income managers to hedge against interest rate fluctuations by exchanging fixed-rate payments for floating-rate payments (or vice versa). This directly reduces interest rate risk in debt portfolios. The option contains a typo: 'interest tate swaps' should be 'interest rate swaps'.

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