The buyer of an interest rate swap is likely to have a negative duration gap that they would like to reduce.

Question

Quizplus · Accepted Answer

The buyer of an interest rate swap is typically looking to reduce their negative duration gap by effectively converting their fixed-rate assets or liabilities to floating-rate, or vice versa. This helps to manage interest rate risk and prevent losses caused by changes in interest rates. The swap allows the buyer to lock in a fixed rate or receive a floating rate, which can help to offset the impact of interest rate changes on their portfolio.

The Buyer of an Interest Rate Swap Is Likely to Have