equity swap

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Equity swap

A swap in which the cash flows exchanged are based on the total return on some stock market index and an interest rate (either a fixed rate or floating rate). Related: Interest rate swap.

Equity Swap

A swap in which the at least one of the two legs is the cash flow from some equity instrument like a stock. For example, the counterparties to an equity swap may agree to exchange the dividends from two stocks of roughly the same value. Alternatively, they may exchange the capital gains from a stock index for an interest rate calculated over a nominal value. Equity swaps may take a variety of forms, but all exist in order to diversify the cash flows of the parties without requiring them to buy anything new. An equity swap may also help one or both parties legally avoid taxation.

equity swap

An exchange of the potential appreciation of an equity's value and dividends for a guaranteed return plus any decrease in the value of the equity. An equity swap permits an equity holder a guaranteed return but demands the holder give up all rights to appreciation and dividend income.
References in periodicals archive ?
Because all equity swaps must post 15 percent prescriptive initial margin levels, and swap dealers were previously using portfolio credit, the effect of the new rules will be a substantial increase in cost to dealers.
Hungry for alpha, hedge funds are turning to equity swaps and synthetic prime to access emerging markets offering attractive spreads and easily identifiable risk arbitrage opportunities.
As noted above, debt for equity swaps are refinancing deals where a company's creditors, such as banks, agree to cancel some/all of their debt in exchange for equity.
In 11 separate equity swaps with an undisclosed third party, Harbinger locked in various prices for hundreds of thousands of "notional" shares of Times stock (NYSE: NYT).
and two other units wholly owned subsidiaries through equity swaps on Aug.
Despite its rather broad language, however, an argument exists that the phrase was not intended to include long positions in equity swaps.
We refer to executive equity swaps as single equity swaps used by senior management.
Equity swaps raise a number of significant legal issues under federal securities and commodities laws that are beyond the scope of this article.
Derivatives, like equity swaps, may enable a plan sponsor to capture a view on a market without disrupting the underlying manager.
Using different approaches, these authors argue that debt conversion schemes, including debt - equity swaps, generate a potential source of efficiency gains resulting from the selection of superior investment projects.
Incidence of Use and Region of Underlying for Equity Swaps Business
The test extended to one month and it was significant because for certain types of equity swaps, independently-built systems at each major dealer require the creation of complex, bespoke connectivity for each counterparty.