interest rate swap


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Related to interest rate swap: Currency swap

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 ?
Although many factors have narrowed interest rate swap spreads (4) since the fall of 2015, we focus primarily on the impact of regulatory increases in required leverage ratios.
The payments under interest rate swap may be periodic and
On the same day, Entity A enters into an interest rate swap contract for $10,000 notional amount.
For the sophisticated commercial borrower, interest rate swaps offer a viable derivative tool to manage interest rate risk over the long term.
An interest rate swap that is accounted for when applying the simplified hedge accounting approach remains subject to.
In this new outrage around 40,000 firms - many of them small businesses like fish and chip shops - were sold interest rate swaps alongside loans.
"Being the first platform to offer live and executable prices of interest rate swaps in multiple Mena currencies validates our strong commitment to the region," said Barclays Mena chief executive John Vitalo.
3) What is the anomaly in current market conditions that makes an interest rate swap a viable option for both parties involved in the swap?
The term was for five years, with a balloon payment, and included a purchase of the interest rate swap instrument, according to the lawsuit.
The bank has claimed that central clearing of interest rate swaps preserves key aspects of the OTC market while reducing counterparty risk inherent in such transactions.
By backloading and clearing future interest rate swap transactions, MPS will benefit from reduced counterparty risk, potential capital relief, a more efficient collateral management process and lower overall operational risks.
In an interest rate swap by comparison, it can be argued that the uncertainty of interim payment amounts is not material to the floating rate payer.

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