Series 50: Other Facts About Swaps

Other Facts about Swaps

• • Interest rate swaps are usually reset semiannually.
• • Payments are typically made on a semiannual basis.
• • The effective date is the date that interest payments begin to accrue, but the payment date is the date that payments are due.
• • The party that owes more pays the other party only the amount of the difference (net settlement basis).
• • There is no exchange of principal amounts
• • Interest is calculated on a “notional principal.” amount.
• • Maturity of a swap is usually 3 to 10 years.
• • Most swaps are purchased by or sold to a swap deale