When selling derivatives with interest rate swaps, additional savings may bring additional risks. But issuers may already be exposed to similar risks without using swaps. Paradoxically, the so-called riskier swap could lower an issuer's total risk profile in that case.

Underwriters generally distinguish between two types of derivative transactions involving swaps. Embedded swaps accompany derivative products that are structured to meet investors' desires. The issuer passes along to investors the changing payout from the swap.

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