If the price of the underlying asset increases before the expiration date the buyer may exercise/ close the options/ futures contract. The buyers gain and corresponding sellers loss will be the difference between the strike price and value of the underlying asset at that time. Hence, the net transfer of wealth is zero. thumb|390x390px Swaps, which involve the exchange of cash flows from two different financial instruments, are also considered a zero-sum game. Consider a standard interest rate swap whereby Firm A pays a fixed rate and receives a floating rate; correspondingly Firm B pays a floating rate and receives a fixed rate. If rates increase, then Firm A will gain, and Firm B will lose by the rate differential (floating rate – fixed rate). If rates decrease, then Firm A will lose, and Firm B will gain by the rate differential (fixed rate – floating rate).
If the price of the underlying asset increases before the expiration date the buyer may exercise/ close the options/ futures contract. The buyers gain and corresponding sellers loss will be the difference between the strike price and value of the underlying asset at that time. Hence, the net transfer of wealth is zero. thumb|390x390px Swaps, which involve the exchange of cash flows from two different financial instruments, are also considered a zero-sum game. Consider a standard interest rate swap whereby Firm A pays a fixed rate and receives a floating rate; correspondingly Firm B pays a floating rate and receives a fixed rate. If rates i,ncrease, then Firm A will gain, and Firm B will lose by the rate differential (floating rate – fixed rate). If rates decrease, then Firm A will lose and Firm B will gain by the rate differential (fixed rate – floating rate).