In a conventional interest rate swap agreement, the swap buyer commits to paying the swap seller a series of floating-rate interest rate payments. This assertion is untrue.
A contract for an interest rate swap is made by two parties, also known as "counterparties." illustrates how the counterparties' agreement to exchange payments based on a specified principal amount over a predetermined time period.
An agreement to exchange (swap) interest payment streams with different characteristics but denominated in the same currency is known as an interest rate swap. The agreed-upon amount of notional principal is used to calculate the interest payments, although this amount is never really traded.
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