📝 One-liners · 65 cards
Swap and swaptions
What is an interest rate swap?
An interest rate swap is a derivative contract in which two parties exchange interest payment streams on a notional principal amount, typically one fixed-rate stream for one floating-rate stream, without exchanging the principal itself.
What is an American swaption?
A swaption exercisable on any date before expiry.
What is the notional principal in a swap agreement?
The notional principal is the reference amount on which swap payments are calculated; it is never actually exchanged between counterparties and serves only as the basis for computing periodic cash flows.
What is a Bermudan swaption?
A swaption exercisable on specific predetermined dates only.
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