Financial Risk Management
Find and look at the charts of your choice, then:
1) Discuss how the ECB and the FED are coping with the surge of inflation.
2) Suppose you were a fixed income trader. Choose 3 Italian Government bonds with maturities equal to 5, 10 and 20 years respectively and compute their Duration and Convexity. Quantify the impact of the foregoing monetary policy choices on your portfolio (for simplicity, assume a parallel shift in the yield curve). Do not forget to provide with a detailed overview of the relationship between bond prices and interest rate levels.
3) Discuss the impact of the monetary tightening on the EUR/USD exchange rate.
4) Suppose you were a trader, how would hedge your portfolio against FX risk using options?
Do not forget to provide with both a theoretical discussion and a quantitative realistic example of the resulting payoff profile.