Explanation:
The fixed-rate payer is effectively long the equity and will therefore incur additional losses should the equity return be negative.
(Book 3, Module 46.3, LO 46.l)
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Question 93
Which of the following statements in relation to an equity swap is least correct?
A
The fixed-rate payer will never pay more than the fixed rate.
B
The equity return receiver benefits from an increase in the stock market.
C
The equity return payer is effectively short the stock market.
D
Equity swaps are over-the-counter instruments.
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