Different types of swaps
1 answersQuestion asked ( August 15, 2009 , Shopping / Finance )
Is swaps very complex to understand? Can someone explain in simple terms the different types of swaps operating in financial market?
Answers to : Different types of swaps...
Answer
The Swaps can be divided into five major types
Interest rate swaps-In this contract the stream of interest is interchanged. Fixed rate interest payments can be exchanged with a floating rate interest payment and vice versa. The interest differential is paid or received, particular to that case.
Currency swaps- In this contract the principal and the interest of one currency is exchanged with the principal and interest in another currency.
Commodity swap- In this contract the floating price is exchanged with the fixed price of the commodity.
Equity swap-This is a contract wherein the floating rate such as LIBOR is exchanged with the performance of the stock or stock index. This contract is exchanged with two parties at a future date.
Credit default swaps-This is a contract wherein the buyer makes payments to the seller and in return takes a payoff when his bond or loan (credit instrument) defaults.
| Buy these photos from Dreamstime.com |  | ||
|
|||
Comment to : Different types of swaps
You are not logged in. Sign up or Log in