Skip to content

CFA Level I · CFA Level I Exam · Pricing and Valuation of Interest Rate and Other Swaps

Compared with a plain vanilla interest rate swap, a currency swap most likely differs in that the:

A currency swap typically exchanges notional principal, at the start and again at maturity, because the legs are in different currencies. A plain vanilla interest rate swap uses one currency and exchanges only the net interest difference, with no principal changing hands.

  1. Arates are always floating
  2. Bnotional principal is typically exchangedCorrect
  3. Cpayments are netted each period

Explanation

Because the two legs are in different currencies, the notionals cannot be offset. Currency swaps usually exchange notional principal at initiation and again at maturity, and interest payments are typically not netted. Interest rate swaps use a single currency, so only the net interest difference is paid. Currency swap legs may be fixed or floating.

Did you get it right without looking?

One question tells you little. A timed set on Pricing and Valuation of Interest Rate and Other Swaps shows your real accuracy, how long you take and where you lose marks.

Practise Pricing and Valuation of Interest Rate and Other SwapsFree diagnostic mock

More Pricing and Valuation of Interest Rate and Other Swaps questions