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Capital Markets, Derivatives, and the LawPositivity and Preparation$
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Alan N. Rechtschaffen

Print publication date: 2019

Print ISBN-13: 9780190879631

Published to Oxford Scholarship Online: May 2019

DOI: 10.1093/oso/9780190879631.001.0001

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Types of Swaps

Types of Swaps

Chapter:
(p.199) 12 Types of Swaps
Source:
Capital Markets, Derivatives, and the Law
Author(s):

Alan N. Rechtschaffen

Publisher:
Oxford University Press
DOI:10.1093/oso/9780190879631.003.0012

A swap is a bilateral over-the-counter derivatives contract in which two parties agree to exchange cash flows on a “notional amount” over a period of time. The notional amount is a reference amount upon which the payment formula is based. The parties exchange cash flows pursuant to an agreed-upon payment schedule, made up of one or more payment dates throughout the life of the contract. Cash flows are computed by applying the agreed-upon formula relating to each party's respective set of payments of the swap to a notional amount, that is, a hypothetical underlying value that does not necessarily itself change hands. This chapter discusses “plain vanilla” interest rate swaps, currency swaps, credit-default swaps, and the move toward regulatory reform.

Keywords:   over-the-counter derivatives contract, cash flow, interest rate swap, currency swap, credit-default swap

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