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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
"Debt to equity swaps and creditor haircuts are good in principle, but will they actually be used?" he said in a statement.
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.
CMBOR has no firm figures on debt for equity swaps being carried out, but chief Rod Ball said of the deals being done at the top of the market: "More and more (swaps) seem to be happening - not just in the UK, but on the Continent as well - although they tend to keep quite quiet about it.
In about 30 "equity swaps" with a London-based brokerage firm that specializes in derivatives, Harbinger bet on the price change of millions of "notional" shares of Times Co.
and two other units wholly owned subsidiaries through equity swaps on Aug.
Pradhan, 1991, "Debt Equity Swaps as Bond Conversions--Implications for Pricing", Journal of Banking and Finance, 15:29-41
The holding company said it will buy shares from external shareholders with cash, and is also scheduled to obtain some shares in the trust bank through equity swaps.
Despite its rather broad language, however, an argument exists that the phrase was not intended to include long positions in equity swaps. Rather, it seems as if it was designed to deal with "equity kicker" type investments, such as shared appreciation mortgages, as the regulations state "a loan to an individual or entity under the terms of which a holder of the indebtedness has any direct or indirect right to share in appreciation in value of an interest in real property of the debtor is, in its entirety, an interest in real property other than solely as a creditor." (13) The regulations illustrate this principle by example: A non-U.S.
Macquarie and IBJ will combine to trade and issue Japanese equity derivatives products, including listed and over-the-counter (OTC) options, convertibles, equity swaps, warrants and other structured business deals for wholesale and retail clients in Japan, Europe and other markets.
The ingenuity of financial engineers, however, has created a new challenge to accurately identifying corporate insider holdings, executive 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.