CHAPTERSIXTY-TWOINTEREST-RATE SWAPS AND SWAPTIONS

FRANK J. FABOZZI, PH.D., CFA, CPA

Professor of FinanceEDHEC Business School

STEVEN V. MANN, PH.D.

Professor of FinanceMoore School of BusinessUniversity of South Carolina

MOORAD CHOUDHRY, PH.D.

MD, Head of Business Treasury, Global Banking & MarketsRoyal Bank of Scotland

Swaps and swaptions are also used extensively by market participants to control interest-rate risk. The most prevalent swap contract is an interest-rate swap. An interest-rate swap contract provides a vehicle for market participants to transform the nature of cash-flows and the interest-rate exposure of a portfolio or balance sheet. In this chapter we explain how to analyze interest-rate swaps. We will describe a generic interest-rate ...

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