Skip to content

CFA Level I · CFA Level I Exam · Forward Commitment and Contingent Claim Features and Instruments

Compared with a plain vanilla interest rate swap, a currency swap most likely differs because it typically involves:

A currency swap typically exchanges principal at initiation and again at maturity. The notionals are in two currencies, and interest is paid in each currency during the term. A plain vanilla interest rate swap, by contrast, never exchanges the notional.

  1. Aonly floating payments in both currencies
  2. Ba single settlement in the home currency at maturity
  3. Can exchange of principal at initiation and at maturityCorrect

Explanation

Because the notionals are in different currencies, a currency swap normally exchanges principal at the start and re-exchanges it at maturity, with interest paid in each currency in between. A vanilla swap does not exchange principal.

Did you get it right without looking?

One question tells you little. A timed set on Forward Commitment and Contingent Claim Features and Instruments shows your real accuracy, how long you take and where you lose marks.

Practise Forward Commitment and Contingent Claim Features and InstrumentsFree diagnostic mock

More Forward Commitment and Contingent Claim Features and Instruments questions