ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A swap is a derivative contract where one party exchanges or “swaps” the cash flows or value of one asset for another. For example, a company paying a variable rate of interest may swap its interest payments with another company that will then pay the first company a fixed rate.

Detailed explanation-2: -Common examples of derivatives include futures contracts, options contracts, and credit default swaps. Beyond these, there is a vast quantity of derivative contracts tailored to meet the needs of a diverse range of counterparties.

Detailed explanation-3: -Derivatives are a contract between two or more parties with a value based on an underlying asset. Swaps are a type of derivative with a value based on cash flow, as opposed to a specific asset.

Detailed explanation-4: -#1 Interest rate swap. Counterparties agree to exchange one stream of future interest payments for another, based on a predetermined notional principal amount. #2 Currency swap. #3 Commodity swap. #4 Credit default swap. 05-Dec-2022