NPCs involve two parties who agree contractually to pay each other amounts at specified times, based on the underlying notional amount. The simplest example of an NPC is a so-called interest rate swap, in which one party (Party A) pays the other party (Party B) an amount each quarter determined by multiplying a floating, market-determined interest rate (e.g., LIBOR) by the notional amount; and Party B pays Party A on the same date an amount determined by multiplying a fixed interest rate by the notional amount.
NPCs involve two parties who agree contractually to pay each other amounts at specified times, based on a predetermined base amount. The most basic illustration of an NPC is a so-called interest rate swap, where one party (Party A) pays the other party (Party B) an amount every quarter determined by multiplying a floating, market-determined interest rate (e.g., LIBOR) by the base amount; and Party B pays Party A on the same date an amount determined by multiplying a fixed interest rate by the base amount.