FinancialMarketsChap30

FinancialMarketsChap30 - Finance Ch. 30 Accrediting swap An...

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Finance Ch. 30 Accrediting swap – An interest rate swap in which the notional principal amount increases in a predetermined way over time Amortizing swap – An interest rate swap in which the notional principal amount decreases in a predetermined way over the life of the swap Asset swap - Use of an interest rate swap to change the cash flow characteristics of assets Basis Rate swap – An interest rate swap in which both parties exchange floating-rate payments based on a different money market reference rate Bullet Swap - An interest rate swap in which the notional principal amount does not vary over the life of the swap Buy-Back (or close-out swap or cancellation swap ) – A secondary market transaction in the swap market in which a party that wishes to close out the original swap sells the swap to the original counterparty Caption – An option on an interest rate cap Credit Default Swap – A type of credit derivative that can be either credit insurance or a total return credit swap Credit Derivative – Derivatives instrument whose payoff depends on some type of credit event and can be used to control credit risk Credit Forward Contract – A forward contract in which the underlying is a credit spread and the payoff depends on the credit spread at the settlement date of the contract Credit Insurance – A type of credit default swap wherein the buyer pays a fee to enter into a credit default swap. While called a swap, it is basically a package of credit options Credit Option – a type of credit derivative Credit Option written on an Underlying Issue – A type of credit option whereby the payout is determined based on whether a default occurs for the underlying issue Credit spread risk – The risk that an issuer’s debt obligation will decline due to an increase in the credit spread demanded by the market. Downgrade risk – The risk of an unanticipated downgrading of an issue or issuer resulting in a decline in the price of the issue or the issuer’s bonds Fixed-rate payer – The party in an interest swap that pays a fixed rate and receives a floating rate Floating-rate payer - The party in an interest swap that pays a floating rate and receives
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FinancialMarketsChap30 - Finance Ch. 30 Accrediting swap An...

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