A swap arrangement where the floating payment is the average cash rate over the swap term is called:
A)a credit default swap
B)a fixed-for-floating interest rate swap
C)an overnight indexed swap
D)a currency swap
E)a plain vanilla interest rate swap.

Question

Quizplus · Accepted Answer

This is because an overnight indexed swap (OIS) is a type of interest rate swap where the floating rate is calculated based on an overnight index, such as the average cash rate. This makes it a useful tool for managing short-term interest rate exposure.

A Swap Arrangement Where the Floating Payment Is the Average