Q. In context with the financial markets , an agreement to exchange floating rate payments for fixed rate payments (or vice-versa) at regular intervals over pre-specified period on a certain principal amount is known as ____?
Answer: Interest Rate swap
Notes: The correct answer is "Interest Rate Swap." An interest rate swap is a financial derivative where two parties exchange interest rate cash flows, typically one paying a fixed rate and the other paying a floating rate, based on a notional principal amount. This instrument is widely used for hedging interest rate risk and managing cash flow. The global market for interest rate swaps is substantial, with notional amounts exceeding $500 trillion as of 2021, making it one of the largest segments in the derivatives market.