An Interest Rate Swap Is

question 39

Multiple Choice

An interest rate swap is:

• A) another name for a call option.
• B) another name for a put option.
• C) an agreement between two or more persons to exchange cash flows over some future period.
• D) the name for the exchange of a bond futures contract for an option contract.

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Definitions:

Probability

A mathematical measure of the likelihood of occurrence of a particular event, expressed as a number between 0 and 1.

Major Earthquake

An earthquake of high magnitude that has the potential to cause significant damage and loss of life, usually above a magnitude of 7 on the Richter scale.

Poisson Model

A statistical model that predicts the probability of a given number of events happening in a fixed interval of time or space when these events occur with a known constant mean rate and independently of the time since the last event.

Probability

The quantification of the probability that an event will take place, expressed as a number from 0 to 1, with 0 signifying that the event cannot occur and 1 signifying absolute certainty of occurrence.