CWAP FINAL EXAM WITH COMPLETE ANSWERS GRADE A+ 2023.

Counterparties - Answer In interest rate swap financing, two parties, called counterparties, make a contractual agreement to exchange cash flows at periodic intervals single-currency interest rate swap - Answer "Plain vanilla" fixed-for-floating swaps are often just called interest rate swaps. - one counterparty exchanges the interest payments of a floating-rate debt obligation for the fixed rate interest payments of the other counterparty. Both debt obligations are denominated in the same currency cross-currency interest rate swap - Answer This is often called a currency swap; fixed for fixed rate debt service in two (or more) currencies. Size of the Swap Market - Answer measured by notional principal, a reference amount of principal for determining interest payments. swap bank - Answer generic term to describe a financial institution that facilitates swaps between counterparties. · can be an international commercial bank, an investment bank, a merchant bank, or an independent operator. · The swap bank serves as either a swap broker or swap dealer swap bank broker - Answer As a broker, the swap bank matches counterparties but does not assume any risk of the swap. - The swap broker receives a commission for this service swap bank dealer - Answer The dealer capacity is riskier, and the swap bank would receive a portion of the cash flows passed through it to compensate it for bearing this risk.