easy · FRM Part 1 Financial Markets and Products
What is 'novation' in the context of centrally cleared swaps?
- The periodic process of resetting the swap fixed rate to reflect current market interest conditions
- The routine calculation of each counterparty's net interest payment obligation due at the very end of the period
- The legal termination of a swap agreement that is automatically triggered by a counterparty payment default event
- The replacement of a bilateral contract with two separate contracts with a central counterparty (CCP).
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