The Swap Dealer

Ross et al.: Fundamentals VIII. Topics in Corporate 23. Risk Management: An © The McGraw-Hill of Corporate Finance, Sixth Finance Introduction to Financial Companies, 2002

Edition, Alternate Edition Engineering

CHAPTER 23 Risk Management: An Introduction to Financial Engineering 795

Commercial banks are the dominant swap dealers in the United States. As a large swap dealer, a bank would be involved in a variety of contracts. It would be swapping fixed-rate loans for floating-rate loans with some parties and doing just the opposite with other participants. The total collection of contracts in which a dealer is involved is called the swap book. The dealer will try to keep a balanced book to limit its net exposure. A balanced book is often called a matched book.

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