tailieunhanh - INTEREST RATE SWAPS

Why was it a mistake for the Fed to flood the system with so much liquidity that short- term interest rates were driven toward zero? In line with textbook economic theory, the Fed focused mainly on the shortfall in aggregate demand rather than on the underlying supply constraint on credit availability. However, starting from a position where interest rates are already very low, say 2 percent as in early 2008, reducing them to zero has only a second-order effect on expanding aggregate demand. But going from 2 percent to zero has a first-order effect of tightening the credit constraint on the. | INTEREST RATE SWAPS September 1999 INTEREST RATE SWAPS Definition Transfer of interest rate streams without transferring underlying debt. 2 FIXED FOR FLOATING SWAP Some Definitions Notational Principal Reset Period The dollar the interest rates apply to. Period over which the coupon is fixed. By tradition fixed rate payer has sold swap floating rate payer has bought swap.

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