interest rate swap

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Interest rate swap

A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable.

Interest Rate Swap

The exchange of interest rates for the mutual benefit of the exchangers. The exchangers take advantage of interest rates that are only available, for whatever reason, to the other exchanger by swapping them. The two legs of the 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. Each party pays the other at set intervals over the life of the swap. For example, one party may agree to pay the other a 3.5% interest rate calculated over a notional value of $1 million, while the second party may agree to pay LIBOR + 0.5% over the same notional value. It is important to note that the notional amount is arbitrary and is not actually traded. This is also called a plain vanilla swap.

interest rate swap

See swap.

interest rate swap

see SWAP.
References in periodicals archive ?
Offsetting these ratings strengths are the company's almost exclusive use of secured debt, geographically concentrated portfolio, active development pipeline and recent acquisitions of assets with large amounts of vacancy, and recent missteps in the utilization of forward-starting swap contracts.
Asbury-MD also has a forward-starting swap (execution date in 2013) and a basis swap contract outstanding with Lehman Brothers, which are yet to be resolved.
Risks include continued enplanement declines, a rising cost per enplaned passenger (CPE), the expiration of the current airline use-and-lease agreement in June 2011, and the April 2011 effective date of two forward-starting swap agreements, which have a negative fair value of $8 million as of March 2010.
However, the airport has two forward-starting swaps outstanding.
Fitch has been informed that Greenspring plans to enter into a forward-starting swap with a notional amount of $30 million.
The current issues involve a forward-starting swap in which the state will pay the counterparties a fixed rate and receive payments tied to the BMA index.
Current DSRF investment agreements may be terminated at par beginning on the start date of the forward-starting swap, which would allow officials to move funds into floating- rate securities to offset the swap obligation should the city's costs exceed the funds received from the counterparty.
01 per diluted share of common stock relating to the settlement of two forward-starting swaps.
As previously announced, including offering expenses and the settlement of forward-starting swaps, the all-in effective rate of these unsecured notes is approximately 5.
As previously announced, including offering expenses and the settlement of three forward-starting swaps, the all-in effective rate of these unsecured notes is 5.
Including all offering expenses and the settlement of two forward-starting swaps, the all-in effective rate of the unsecured notes is 5.