Consider a swap to pay currency A floating and receive currency B floating.What type of swap would be combined with this swap to produce a swap to produce a plain vanilla swap in currency B.
A)pay currency B floating,receive currency A fixed
B)pay currency B fixed,receive currency A floating
C)pay currency B fixed,receive currency A fixed
D)pay currency B floating,receive currency A floating
E)none of the above

Question

Quizplus · Accepted Answer

A plain vanilla swap in currency B would involve paying a fixed rate in currency B and receiving a floating rate in currency B. To achieve this, we need to combine the original swap of paying currency A floating and receiving currency B floating with a swap of paying currency B fixed and receiving currency A floating. This combination would result in paying fixed in currency B and receiving floating in currency B, while also receiving floating in currency A and paying fixed in currency A. Option B fits this combination.

Consider a Swap to Pay Currency a Floating and Receive