Which of the following factors does affect the valuation of a fixed notional equity swap that pays the equity return in exchange for a fixed interest rate payment?
A) Expected equity price growth.
B) Interest rate volatility structure.
C) Interest-rate term structure.
D) All of the above.

Question

Which of the following factors does affect the valuation of a fixed notional equity swap that pays the equity return in exchange for a fixed interest rate payment? 
A) Expected equity price growth.
B) Interest rate volatility structure.
C) Interest-rate term structure.
D) All of the above.

Quizplus · Accepted Answer

The valuation of a fixed notional equity swap is primarily affected by the interest-rate term structure, as it determines the present value of the fixed interest rate payments. Expected equity price growth and interest rate volatility structure do not directly impact the valuation of such a swap.

Which of the Following Factors Does Affect the Valuation of a Fixed