ABSTRACT
This chapter provides an introduction to structured products in the form of plain vanilla interest-rate swaps. Swaps are very widely traded and measuring their value in terms of notional principal produces some outrageous numbers. Each loan creates a financial instrument called a mortgage bond, a student loan bond, or a car loan bond. The implication is that a standard forward contract is a kind of swap with a single set of cash flows at expiration. Interest rate derivatives are a little more complex, particularly if one thinks in terms of rates. The notional value of currency swaps was US$26,318,000,000,000 which is a mere 26.318 trillion US dollars.
