Interest-Rate Swap Structure and Cash-Flow Calculations

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Interest-Rate Swap Structure and Cash-Flow Calculations - Article

An Interest-Rate Swap (IRS) allows two parties to exchange different interest-payment streams on a **notional principal** without normally exchanging that principal. This article explains fixed and floating legs, pay-fixed and receive-fixed positions, periodic cash-flow calculations, net settlement, Overnight Indexed Swaps, par swap rate, swap valuation, and the use of IRS for converting fixed-rate exposure into floating-rate exposure or vice versa.

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