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 ?
Interest rate swaps are forward contracts where one stream of future interest payments is exchanged for another, based on a specified principal amount.
Operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 40.2 billion yen to 436.4 billion yen.
Operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 37.0 billion yen (*$336.3 million) to 115.4 billion yen (*$ 1.0 billion).
Operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 11.9 billion yen ($107.20 million) to 144.1 billion yen ($1.29 billion).
In Europe, vehicle sales totaled 724,800 units, an increase of 18,908 units, while operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 24.5 billion yen to 87.0 billion yen.
There is an active market for rupee interest rate swaps offshore and domestic market has witnessed increasing participation from non-resident players like FPIs in debt.
Market innovations, such as the introduction of mandatory central clearing for U.S.-dollar-denominated interest rate swaps, have reduced the counterparty risk priced into interest rate swaps.
Dollar International Swaps and Derivatives Association Fix, a leading global benchmark referenced in a range of interest rate products, to benefit its derivatives positions, including positions involving cash-settled options on interest rate swaps and interest rate swap futures.
The essence of the interest rate swaps can be summarised as
Companies routinely utilize interest rate swaps to reduce their exposure to changes in the fair value of assets and liabilities or cash flows due to fluctuations in interest rates.
He has also served as JPMorgan's managing director and head of the New York interest rate swaps and options trading business.
He became one of JPMorgan's youngest managing directors, and head of the New York interest rate swaps and options trading business.

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