24-75 Which of the following describes the process of "netting" in the swap market?
A)Stripping out the "interest rate" sensitive element of total return swaps to reduce the net portfolio risk.
B)Acting as an intermediary by bringing together two FIs with opposing interest rate risk exposures to enter into a swap agreement.
C)Turning fixed-rate liabilities into net variable-rate liabilities.
D)Calculating the net difference between the two payments,and making a single payment for the net difference.
E)Squaring off contracts on or before expiry.

Question

Quizplus · Accepted Answer

Netting in the swap market involves calculating the net difference between the two payments made by the parties involved in the swap and making a single payment for the net difference. This process helps to reduce the number and value of transactions required for settling a swap agreement, leading to lower costs and operational risks.

24-75 Which of the Following Describes the Process of "Netting