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5 Cards in this Set
- Front
- Back
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17.71a: swaps are based on a ..... of principal
17.71a: each party is obligated to pay a _______ |
notional amount of principal
% return on the notional amount at periodic settlement dates over the life (tenor) of the swap. |
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17.71a: Swaps percentage payments are based on....
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a floating rate, fixed rate, or the return on an equity index or portfolio
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17.71a: How does money change hands in a swap?
What is an exception? |
no money changes hands at inception of swap and periodic payments are netted (party that owes larger amnt pays diff. to the other)
- Currency swap (money changes hands at inception) |
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17.71a: Swaps can be terminated prior to their stated termination dates by: (3 ways)
1. Entering into .... 2. Agreeing .... 3. Selling the... |
1. Enterting into an offsettinfg swap, sometimes by excercising a swaption (most common)
2. Agreeing w/counterparty to term. (likely involves making or receiving compensation) 3. Selling the swap, to a 3rd party, with consent of the original counterparty (uncommon) |
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17.71b:What happends in a plain-vanilla (fixed-for-floating) intrst rate swap?
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1 party agrees to pay floating-rate intrst on notional amount & counterparty agrees to pay a fixed rate of intrest
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