When a bank enters into a fixed-floating currency swap,it is exposed to
A)both interest rate and currency exposures.
B)only interest rate exposures.
C)only exchange rate exposure.
D)zero interest rate exposure over the life of the swap.

Question

Quizplus · Accepted Answer

In a fixed-floating currency swap, the bank is exchanging fixed interest rate payments in one currency for floating interest rate payments in another currency. This means that the bank will be exposed to fluctuations in both interest rates and currency exchange rates between the two currencies involved in the swap. Therefore, option A is the correct answer.

When a Bank Enters into a Fixed-Floating Currency Swap,it Is