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94

A floating-for-fixed currency swap is equivalent to

A.Two interest rate swaps, one in each currency

B.A fixed-for-fixed currency swap and one interest rate swap

C.A fixed-for-fixed currency swap and two interest rate swaps, one in each currency

D.None of the above

A.Two interest rate swaps, one in each currency

B.A fixed-for-fixed currency swap and one interest rate swap

C.A fixed-for-fixed currency swap and two interest rate swaps, one in each currency

D.None of the above

Answer: B

A floating-for-fixed currency swap where the floating rate is paid in currency X and the fixed rate is received in currency Y is equivalent to (a) a fixed-for-fixed currency swap where, say, 5% in currency X is paid and the fixed rate in currency Y is received, (b) a regular interest rate swap where 5% in currency X is received and floating in currency X is paid.

A floating-for-fixed currency swap where the floating rate is paid in currency X and the fixed rate is received in currency Y is equivalent to (a) a fixed-for-fixed currency swap where, say, 5% in currency X is paid and the fixed rate in currency Y is received, (b) a regular interest rate swap where 5% in currency X is received and floating in currency X is paid.

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015