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93

A floating for floating 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: C

A floating-for-floating currency swap where the currency paid is X and the currency received is Y is equivalent to (a) a fixed-for-fixed currency swap where, say, 5% in currency X is paid and say, say, 4% 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 and (c) a regular interest rate swap where 4% in currency Y is paid and floating in currency Y is received.

A floating-for-floating currency swap where the currency paid is X and the currency received is Y is equivalent to (a) a fixed-for-fixed currency swap where, say, 5% in currency X is paid and say, say, 4% 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 and (c) a regular interest rate swap where 4% in currency Y is paid and floating in currency Y is received.

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015