A Variable Notional Equity Swap Differs from a Fixed Notional

question 10

Multiple Choice

A variable notional equity swap differs from a fixed notional equity swap in that

• A) The variable notional swap involves a principal that, like an amortizing swap, decreases from period to period in a predetermined manner.
• B) The variable notional swap involves a principal that changes from period to period depending on realized returns on the underlying equity or equity index.
• C) The variable notional swap involves a principal that changes from period to period depending on realized Libor rates during the receding period.
• D) In a variable notional swap, the receiver of equity returns can choose whether to pay Libor or the returns on a specified broad market index on each payment date.

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