What are the four main uses of interest-rate swaps

Q: Define the structure of interest rates and list two theories used to explain the structure.

A: Introduction Structure of interest rates: The yield curve, or term structure of interest rates,…

Q: The market interest rate related to a bond is also called the

A: The market interest rate related to a bond effective interest rate.

Q: Which one of the below most likely respresents the periodic receipts of interest? O the coupon rate.…

A: Periodic payments means fixed amount paid regularly to the investor. Example interest amount on…

Q: What is the difference between pegged and floating rate exchanges?

A: A nominal exchange rate that is firmly established by the monetary authority with regard to a…

Q: What is margin requirement (for futures)?

A: Solution:- A Margin Requirement is the share of marginable securities that an investor should pay…

Q: What are some types of credit derivatives?

A: A credit derivative is a type of financial contract where credit assets are kept as an underlying…

Q: Explain Interest Rates and Risk?

A: Interest Rate: Interest rate is the percentage of interest charge by a lender on his principal…

Q: Interest rates and bond prices have a direct relationship? true or false

A: Bonds are fixed income debt instruments used by companies to raise funds. The investors in return…

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.