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7. What is the necessary condition for a fixed-for-floating interest rate swap to be possible?

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Answer #1

There should be a quality spread differential for a fixed-for-floating interest rate swap to be possible.

Quality Spread Differential :-

Difference in the interest rate of two debt securities involved in an interest rate swap.

Mostly, default rate risk premium of floating rate debt is less than , that of , fixes rate debt.

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