Both parties in an interest rate swap normally are fully hedged against interest rate risk on the notional amount of the swap.

Question

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In an interest rate swap, typically one party is hedged against rising interest rates (receiving fixed, paying variable), while the other is hedged against falling interest rates (receiving variable, paying fixed). Neither party is fully hedged against all interest rate risks on the notional amount.

Both Parties in an Interest Rate Swap Normally Are Fully