Swaps and Swap Derivatives
The swap in its simplest form can be described as a periodic exchange (or ‘swap’) of payments between two counterparties for a specified period of time; the exchange is generally based on interest rates, currency rates or commodity prices. The actual exchange of payments is governed by a contractual agreement between the participants and is reflected as an off-balance sheet exposure.
KeywordsInterest Rate Credit Risk Market Rate Replacement Cost Historical Volatility
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