Exam 22: Equity Swaps

A US-based investor enters into an unhedged cross-currency equity swap in which he pays returns on the S&P 500 index in dollars in exchange for receiving the returns on the FTSE 100 in pounds.At inception,the notional principal on the swap is $100 million,and the exchange rate is $1.60 = 1.Cash flows are exchanged every six months and the first six-month period has 182 days in it.At the end of the first six-month period,the raw returns on the S&P 500 are 8% and the raw returns on the FTSE 100 are 9%.The exchange rate at this point is $1.50 = 1.The investor's net cash flow on this first payment date is $£$

Which of the following factors does not affect the valuation of a variable notional equity swap that pays the equity return in exchange for Libor?

Executives are often very heavily invested in their own stock.To mitigate the effects of this concentration,which of the following actions could they take?