Which of the following statements about diff swaps is true?
A)they involve interest payments in separate currencies
B)they are based on the difference between interest rates in two countries
C)they are based on the difference between interest rates of different maturities
D)the notional principal reduces throughout the life of the swap
E)the notional principal increases throughout the life of the swap

Question

Quizplus · Accepted Answer

Diff swaps are based on the difference between interest rates in two countries. They involve exchanging payments based on a notional principal amount in one currency for payments based on a notional principal amount in another currency. The interest rates used in the calculations are typically benchmark rates for each currency, such as LIBOR or EURIBOR. The notional principal remains constant throughout the life of the swap.

Which of the Following Statements About Diff Swaps Is True