Question

What name is given to the instrument that allows money market participants to pay/receive the difference between two benchmark interest rates ?

Interest rate guarantee
Basis Swap
Forward rate guarantee

Answer 1

Answer:

Interest rate swaps

is the answer ..

Answer 2

The instrument that allows money market participants to pay/receive the difference between two benchmark interest rates is the Interest rate guarantee.

• the interest rate guarantee or swap occurs when there is an exchange of future interest payments based on a specified principal amount
• they are used as hedges against losses, to manage credits or simply for speculation
• they are usually traded over the top markets.
• they are of three main types fixed-to-floating, floating-to-fixed, and floating-to-floating

Thus, the answer is Option A