Question

In a swap transaction where two fixed-floating currency swaps are combined to form a fixed to fixed currency swap is known as

• A. Roller-coaster swap
• B. Amortized swap
• C. Amortizing swap
• D. Circus swap

Answer 1

The Correct Option is D

In financial terms, a swap is a derivative contract through which two parties exchange financial instruments, typically cash flows based on a specified principal amount. Swaps are often used to manage the interest rate risk of a portfolio.

There are different types of swaps, including:

• Fixed-floating currency swaps: These involve the exchange of fixed interest rate cash flows in one currency for floating interest rate cash flows in another currency.
• Fixed to fixed currency swaps: These involve the exchange of fixed interest rate cash flows in one currency for fixed interest rate cash flows in another currency.

In some swap transactions, two fixed-floating currency swaps are combined to form a fixed to fixed currency swap. This specific type of swap is called a "Circus swap."

Hence, the correct answer to the given question is: Circus swap.