Example 3

A

B

time 0:

1 year later:

A

B

$ 6m

£ 4m interest

T years later:

A

B

2 years later:

A

B

$ 6m

£ 4m interest

.

.

.

.

.

.

Eliminate principal payments.

$ 6m

£ 4m interest

The reason

someone might

want such a swap

is that they have

not just one cash

flow that they

want to hedge,

but rather a series

of cash flows.

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