An agreement between two parties to exchange a series of specified periodic cash flows in the future based on some underlying instrument or price is a(n): a. forward agreement. b. futures contract. c. interest rate collar. d. option contract. e. swap contract. Clear my choice

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Q: An agreement between bwo parties to exchange a series of specified periodic cash flows in the future…

A: SWAP has a principal which is not exchanged hence its called notional principal.

Q: A "cash and carry" transaction

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Q: Interest-rate swaps are: Answer a. Exchanges of equity securities for debt securities b. Agreements…

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A: A swap contract is an agreement between two parties to exchange their liabilities with each other…

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Q: Define each of the following terms: c. Financial futures; forward contract

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Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.