interest rate swap

(redirected from Swaps, Interest Rate)

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 ?
As of June 30, 2014, 86% of the Company's combined repurchase agreement and net long TBA balance was hedged through interest rate swaps, interest rate swaptions, TBA call options and U.
Regulations will cover derivatives that have traditionally been traded off an exchange such as credit default swaps, interest rate swaps and commodity derivatives.
The most common types of interest rate derivatives include interest rate swaps, interest rate caps, basis swaps, and rate locks.
They develop a methodology that can be used to quantify credit exposure involved in various types of currency swaps, interest rate swaps, and from off-balance-sheet operations.
Swap agreement risk: The Fund may enter into various types of swap agreements, including, but not limited to, credit default swaps, total return swaps, interest rate swaps, index swaps, currency swaps and variance swap agreements.
21, 2012 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, announced today the Commodity Futures Trading Commission (CFTC) has provisionally approved CME Repository Service as a swap data repository (SDR) for credit default swaps, interest rate swaps, commodities and foreign exchange asset classes.
For their modeling needs, portfolio managers can take advantage of the rich set of financial instruments available in the investment module, such as floating rate notes, interest rate swaps, interest rate derivatives, inflation-linked derivatives and equity derivatives.
Treasuries, Agencies, Corporate Bonds, Convertible Bonds, Private Placements, Default Swaps, Interest Rate Swaps and Municipal bonds.
StatPro's CAP service is a web based application that values a wide range of illiquid assets including hard to price fixed income instruments such as European ABS and MBS, Credit-Linked Notes, credit default swaps, interest rate swaps and a range of other OTC Derivative instruments.
They also need the ability to combine many types of securities in a portfolio: stocks, options, credit default swaps, interest rate hedges and convertibles.
The most common derivative contract exposure in Fitch-rated transactions are foreign currency swaps, interest rate swaps, interest rate caps and floors and credit default swaps (CDS).
BGC was also awarded second or third place in 29 additional categories which included short dated interest rate swaps, interest rate swaps 2-10 years, overnight index swaps and forward rate agreements.