An Economic Analysis of Interest Rate Swaps
- 1 July 1986
- journal article
- Published by JSTOR in The Journal of Finance
- Vol. 41 (3) , 645-655
- https://doi.org/10.2307/2328495
Abstract
Interest rate swaps, a financial innovation in recent years, are based upon the principle of comparative advantage. An interest rate swap is a useful tool for active liability management and for hedging against interest rate risk. The purpose of this paper is to provide a simple economic analysis of interest rate swaps. Alternative uses of and the appropriate valuation procedure for interest rate swaps are described.Keywords
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