A contract between two parties to exchange a series of cash flows similar to those resulting from an exchange of different types of bonds is called a(n)
A) interest rate swap.
B) yield curve swap.
C) credit spread.
D) notional spread.
E) none of these.

Question

Quizplus · Accepted Answer

An interest rate swap involves exchanging cash flows based on different interest rates, typically fixed versus floating rates, similar to the cash flows resulting from the exchange of bonds with different characteristics. Yield curve swaps and credit spreads are not commonly used terms in the context of swaps, and notional spread refers to the difference between the notional value of two financial instruments. Therefore, A is the correct answer.

A Contract Between Two Parties to Exchange a Series of Cash