Lenny D. answered • 05/21/19
Financial Professional with many years of Wall Street Experience
Remember that the price of a bond is the present value of the fixed coupon stream plus the present value of the principal. When interest rates rise The present value of both the principal and the coupon stream falls. If you need cash hand have to sell your bond you will be hurt if rates have risen and benefit if rates have fallen you will gain.. The fixed payment stream is subject to interest rate risk..
If you put your cash in an interest rate bearing deposit (say eurodollars). The interest rates will change over time but your principal plus accrued interest can be withdrawn without any capital gains or losses.
. The risk on a swap is identical to the risk on the coupon stream of the bond. I I hope this helps
