easy · FRM Part 1 Financial Markets and Products
In a plain-vanilla interest-rate swap, which of the following best describes the fundamental exchange occurring between counterparties?
- Periodic fixed-rate interest payments for periodic floating-rate interest payments in the same currency.
- The exchange of notional principal amounts at both the very start and the very end of the contract's life.
- Fixed interest payments made in one currency swapped for floating payments in a different currency.
- A single lump-sum payment made at maturity based on the difference between strike and spot rates.
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