An interest rate swap is:
A) A contract to exchange one stream of income payments for another
B) A temporary exchange of one deposit for another of a longer maturity in the same currency
C) A forward-forward contract
D) All of the above

Question

Quizplus · Accepted Answer

An interest rate swap is a contractual agreement between two parties to exchange one stream of future interest payments for another, based on a specified notional amount. This allows each counterparty to achieve its desired mix of fixed and floating interest rates. Options B and C do not accurately describe an interest rate swap.

An Interest Rate Swap Is