Equity swaps

[rickm123]

How does the industry mark a plain vanilla equity swap and what risk measures are associated with an equity swap ---equity delta only i think



Thanks

 

[ShaktiRathore]

Equity Swap is used to exchange cash flows between equities and equity indexes. They can be floating for equity or equity for equity leg. .For e.g. Mr X holds stocks of company C and sees negative fall in returns of the stock in future but does not want to loose the voting rights in the company can enter into equity for equity or equity for floating where he exchange the returns from his owned stocks with the cash flow from other stock/index/floating rate on the notional principal.
There is the risk of other party not paying in the swap agreement so there is credit risk involved. Also the floating rate risk of going up and down gives rise to market risk.