Fixed-rate payer

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 ?
Under such arrangements, the fixed-rate payer usually has the right to terminate the swap after a certain time if rates fall.
X entered into a $10,000,000, 5-year swap on which it is a fixed-rate payer of 9.
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.
6 million and granted the counterparty, JP Morgan Chase, an option to require the Authority to enter into fixed-rate payer swaps in connection with the variable rate refundings of the bonds.
Inbursa is very active in interest rate swaps, but their market value and earnings are highly sensitive to declines in interest rates, since Inbursa acts as the fixed-rate payer (At end-March 2007, the bank estimates that a 100bp decline in domestic interest rates could potentially harm its equity base by roughly 5%).
A counterparty rated `AAA/F1+' by Fitch is the fixed-rate payer, and the City of Atlanta is the variable-rate payer.