Fixed-rate payer

(redirected from Fixed-Rate Payers)

Fixed-rate payer

In an interest rate swap, the counterparty who pays a fixed rate, usually in exchange for a floating-rate payment.

Fixed-Rate Payer

In a plain vanilla swap, the investor who pays the fixed interest rate and receives the floating interest rate. The two legs of a plain vanilla swap are a fixed interest rate, say 3.5%, and a floating interest rate, say LIBOR + 0.5%. In such a swap, the only things traded are the two interest rates, which are calculated over a notional value. The fixed rate payer gives 3.5% of the notional value to the floating rate payer and, in return, receives LIBOR + 0.5% of the same notional value. Each party pays the other at set intervals over the life of the swap.
References in periodicals archive ?
In fact, Wall and Pringle [14] provided survey data indicating that large companies are five times more likely to be fixed-rate payers than fixed-rate receivers.
t, N-t], the fixed-rate payer would then be required to make higher future settlement payments but receive the present value of this amount as an unwind payment at date t.
Thus, if a firm enters the three-year swap as the fixed-rate payer at the market rate of 11%, it knows in advance that it is scheduled to make a settlement payment in one year equal to [F.