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Topic: Interest Rate Swap


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In the News (Tue 21 May 19)

  
  Interest Rate Swap
Interest rate swaps are the most common type of swap Normally at each payment or "settlement date,” the party who owes more pays the net amount; so at any given settlement date only one party actually makes a payment.
The term structure of interest rates and the forward rates implied by the relationship between short and long term rates are critical factors in evaluating interest rate swaps.
The simplest interest swap is called the "plain vanilla" or "fixed for floating rate swap." For example, if a company has a floating rate loan of $10 million with a bank and believes that interest rates will rise, the company may enter into a fixed for floating rate swap with the bank.
www.russell.com /us/glossary/derivatives/interest_rate_swap.htm   (0 words)

  
 FASB: Hedging-General: Application of the Shortcut Method for an Interest Rate Swap-in-Arrears
In plain-vanilla interest rate swaps, the fixed interest rate does not change, while the floating interest rate is determined (that is, reset) at the beginning of each period; thus, on that date, the scheduled net cash flow for the period will be known.
That is, if the swap interest rates are reset every three months, the cash flows occur at the end of each three-month period based upon the interest rates determined at the beginning of the three-month period.
With an interest rate swap-in-arrears, the net cash flow occurs immediately at the interest rate reset date (which is at the end of the reset period).
www.fasb.org /derivatives/issuee16.shtml   (646 words)

  
 Interest Rate Swap
Interest rate swaps are generally used for 'swapping' from a floating rate of interest into a fixed rate of interest, or vice-versa.
A swap is generally used by a borrower funding on LIBOR who believes that interest rates will rise or who wants some certainty in the interest rate to be paid.
Therefore an interest rate swap does not impact on the balance sheet of the company as it is classified as an off-balance sheet item.
www.cbonline.co.uk /0,,72978,00.html   (0 words)

  
 St.George Bank - Interest Rate Swap   (Site not responding. Last check: )
A Swap can be used by borrowers who have a desire to alter their interest rate or cash flow profile to suit their particular needs.
Variable interest rate borrowers would use Swaps to hedge their interest costs in a market where variable interest rates are expected to rise while fixed rate borrowers would use a Swap to take advantage of lower interest rates in a market where variable interest rates are expected to fall.
Should interest rate movements be different to your expectations, the Swap may have the opposite effect to what you were trying to achieve with the transaction.
www.stgeorge.com.au /corporate/transaction/int_rate_rm/swap.asp?orc=institution   (1184 words)

  
 * Interest rate swap - (Business): Definition
Interest Rate Swap - Is the contract whereby one party typically agrees to exchange a floating rate for a fixed coupon rate.
Interest rate swap A binding agreement between to exchange periodic payments on some predetermined dollar principal, which is called the.
Swap in which the principal or notional amount rises (falls) as interest rates rise (decline).
en.mimi.hu /business/interest_rate_swap.html   (458 words)

  
 FASB: Hedging-General: How Paragraph 68(c) Applies to an Interest Rate Swap that Trades at an Interim Date
The floating rate set for that shorter period is the "stub rate." The stub rate is the floating rate that corresponds to the length of the stub period.
The existence of a stub period and stub rate is not a violation of paragraph 68(c) that would preclude application of the shortcut method provided that the stub rate is the floating rate that corresponds to the length of the stub period.
Because many swaps are traded on interim dates, the existence of a stub rate for a single period is a necessary adjustment in a significant number of contracts.
www.fasb.org /derivatives/issuee12.shtml   (0 words)

  
 Internet Rate Risk Management   (Site not responding. Last check: )
An interest rate swap is a contractual arrangement between two counterparties who agree to exchange interest payments on a defined principal amount for a fixed period of time.
Swaps can be used as an efficient, cost effective way to convert floating rate debt to a fixed rate debt or vice versa, depending on the client’s interest rate risk position and view on future interest rates.
Interest rate swaps can be used to “lock-in” a fixed rate of interest on a loan that is committed sometime in the future.
www.oldnational.com /03_commercial/interestrateriskmgt.asp   (967 words)

  
 Interest Rate Swap
The most popular interest rate swaps are fixed-for-floating swaps under which cash flows of a fixed rate loan are exchanged for those of a floating rate loan.
Vanilla interest rate swaps are quoted in terms of the fixed rate to be paid against the floating index.
The swap curve is a yield curve comprising swap rates for different maturities of swap.
www.riskglossary.com /articles/interest_rate_swap.htm   (949 words)

  
 :: Quantnotes.com :: Fundamentals ::
An Interest Rate Swap is a private agreement between two parties to exchange one stream of cash flow for another stream of cash flow on a specific amount of principal for a specific period of time.
Therefore in fixed-floating interest rate swaps, the corporation paying fixed and receiving floating is usually the less creditworthy of the two counterparties.
Interest rate swaps give the less creditworthy entity a way of borrowing fixed rate debts for a longer term at cheaper rates than they could in the capital markets by taking advantage of its relative strength in raising funds with shorter maturities.
www.quantnotes.com /fundamentals/swaps/interestrateswaps.htm   (847 words)

  
 Interest Rate Swap
Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR).
A company will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.
Interest rate swaps are simply the exchange of one set of cash flows (based on interest rate specifications) for another.
www.investopedia.com /terms/i/interestrateswap.asp   (0 words)

  
 Swap (finance) at AllExperts
Swaps are often used to hedge certain risks, for instance interest rate risk.
Interest Rate swaps are the most common type of swap, also known as a 'plain vanilla' swap.
Initially, the terms of a swap contract are such that the NPV of all future cash flows is equal to zero.
en.allexperts.com /e/s/sw/swap_(finance).htm   (842 words)

  
 Forex TA - Interest Rate Swap   (Site not responding. Last check: )
A swap is an agreement between two counterparties to exchange something (one "leg" of the swap) for something else (the other "leg").
The first swaps were commonly used as a way to hedge exposure to market risk for a low fee.
Interest rate swaps allow parties to re-allocate their exposure to interest-rate fluctuations, typically by exchanging fixed-rate obligations for floating rate obligations.
www.forexta.com /content/view/558/102   (692 words)

  
 Interest Rate Swaps and Volatility Bets   (Site not responding. Last check: )
By swapping this floating rate obligtion, the interest rate swap increases the interest rate sensitivity.
If rates rise, the savings and loan will be forced to increase the rate it pays on deposits, but it cannot increase the rate it charges on the martgages that have already been issued.
The swap rate is, at any given moment, the fixed rate that banks, insurers, and other investors demand to be paid in exchange for agreeing to pay the LIBOR rate, a short-term bak rate.
www.bearcave.com /bookrev/swaps_and_vol.html   (624 words)

  
 Wachovia Cancelable Floating to Fixed Interest Rate Swap - Slide 1
CANCELABLE FLOATING TO A Cancelable Interest Rate Swap allows customers to fix the net interest expense of their floating rate loans at a fixed rate below that which is currently available for a standard interest rate swap.
Should Wachovia choose to cancel the remaining term of the swap, the customer would no longer have the interest rate protection of the swap.
At least until the cancellation date and possibly for the entire term of the swap, the customer can achieve a fixed rate lower than that available on a standard interest rate swap.
www.wachovia.com /misc/0,,8,00.html   (213 words)

  
 Judgement - Interest Rate Swap litigation management   (Site not responding. Last check: )
Under a fixed rate of interest loan, the borrower is insulated from any increase in interest rates and has the benefit of certainty, but does not reap any advantage from a fall in interest rates.
In all these cases the Council in question when entering into a swap was anticipating either a rise or a fall in interest rates generally, and the financial consequences, whether a profit or a loss, depended upon whether their anticipation proved to be correct.
All other interest rate swap actions, whether or not presently constituted, including any third party proceedings in such actions, whether against local authorities, brokers or otherwise were ordered to be stayed generally after the close of pleadings in each action or third party proceedings.
www.ucc.ie /law/restitution/archive/englcases/interest.htm   (4497 words)

  
 plain-vanilla interest rate swap
A plain-vanilla interest rate swap is an exchange of a series of fixed interest payments for a series of floating interest payments, fluctuating with LIBOR (London interbank offer rate).
The fixed rate of interest is often quoted as a spread over the current US Treasury security of the desired maturity and is called the swap rate.
The times at which the floating rates are established are called the “reset dates.” The two sides of the swap are called the “fixed leg” and “floating leg”; and the life of a swap is called its tenor.
www.in-the-money.com /glossary/plain-va.htm   (185 words)

  
 Interest Rate Swap   (Site not responding. Last check: )
Interest rate swaps are swap transactions that usually have a term of over a year.
The conditions for plain vanilla swaps are currency, maturity term, both interest rates and rollover data.
For swaps with a variable interest rate calculation, manual or automatic interest rate adjustments are carried out over the course of the term and the cash flow is gradually filled with the current values.
help.sap.com /saphelp_45b/helpdata/en/43/5de078634711d28739080009b423f4/content.htm   (285 words)

  
 Swap Valuation
When rates are low and the yield curve flat the difference between coupon and zero rates will be minimal, but when rates are high and the curve steep, the difference is significant.
DV ’01—the change in dollar value of a swap for a one basis point change in market interest rates— is a simple measure for benchmarking how the value of an interest rate swap changes as interest rates change.
Where zero rates are derived on a continuously compounded basis (the usual method), the formula becomes 1/e rt where e is the natural log, r is the zero rate and t is the term in years.
www.interestrateswaps.info /swap_valuation.htm   (1456 words)

  
 Interest Rate Swap, Definition
A swap in which the two counterparties agree to exchange interest rate flows.
Typically, one party agrees to pay a fixed rate on a specified series of payment dates and the other party pays a floating rate that may be based on LIBOR (London Interbank Offered Rate) on those payment dates.
The interest rates are paid on a specified principal amount called the notional principal.
www.traderslog.com /Interest-Rate-Swap.htm   (65 words)

  
 The University of Texas System - InterestRateSwap
The Board adopted the U. System Interest Rate Swap Policy to govern the use by The University of Texas System of interest rate swap transactions for the purpose of either reducing the cost of existing or planned Revenue Financing System debt, or to hedge the interest rate of existing or planned Revenue Financing System debt.
Basis risk arises as a result of movement in the underlying variable rate indices that may not be in tandem, creating a cost differential that could result in a net cash outflow from the System.
Interest Rate Swap (or Swap):  A transaction in which two parties agree to exchange future net cash flows based on predetermined interest rate indices calculated on an agreed notional amount.
www.utsystem.edu /bor/RegentalPolicies/InterestRateSwap.htm   (1300 words)

  
 Komerční banka Bratislava - IRS (Interest Rate Swap)
This means that the subjects of the swap transaction remain fully responsible for their initial interests due (and/or they remain in the position of creditors of the interests due).
The payment is done by the party, the swap interest rate of which is of a higher value, and the amount equals the differences between the mutually-to-be-offset interest payments.
If the swap were not cancelled as of the date of the interest payments' settlement, the due difference of the so-far accounted costs' and revenues' interests of the cancelled swap is a part of the swap market price.
www.koba.sk /en/seg/seg6/products/irs.shtml   (450 words)

  
 Bob Jensen's Working Paper 231 on Valuation of Interest Rate Swap Contracts
Booking of interest rate swaps entails both the recording of the net present value of future swap cash flows and the amortizing of this balance subsequent to recording.
If swap receivables/payables are reported on balance sheets, it would seem more consistent that these balances be set at the net difference of the present value of future swap cash receipts discounted at their contracted r(t) rate minus the present value of future swap cash payables discounted at their contracted p(t) rate.
Proponents argue that this rate is consistent with the viewpoint that the purpose of the swap is to adjust the underlying notional bond rate by the difference between the p(t) swap rate payable minus the r(t) swap rate receivable.
www.trinity.edu /rjensen/231wp/231wp.htm   (6999 words)

  
 Interest Rate Swap as supplied by EagleTraders.com
Because the parties exchange only the interest payments without exchanging the underlying debt, interest rate swaps do not appear on the balance sheets of the participants, although the inflows and outflows from swap transactions show up on the income statement.
The typical swap transaction involved a firm with a high credit rating with a desire for short-term funds and a lower-rated company needing longer-term fixed-rate funds.
It has become common for companies to use the swap market to transform floating-rate debt into fixed-rate obligations, especially for savings and loans associations that traditionally have substantial gaps between the duration of their assets and that of their liabilities.
www.eagletraders.com /advice/securities/interest_rate_swap.htm   (353 words)

  
 Komerční banka Bratislava - CIRS (Cross Interest Rate Swap)
The party, the swap interest payment of which is higher, settles the difference of the mutually-exchanged interest payments.
Upon the cancellation, the market value of the interest rate swap is being balanced by a lump sum payment, followed by a cancellation of the whole transaction and of all future obligations.
If the swap was not cancelled as of the date of the interest payments_ settlement, the due difference of the so-far accounted costs´ and revenues´ interests of the cancelled swap is a part of the swap market price.
www.koba.sk /en/seg/seg6/products/cirs.shtml   (496 words)

  
 466-10
Current spot rate is $0.90/€, so the firm could consider raising $36m in U.S. by issuing bonds at 8% (payable in dollars), and converting $36m to €40m to finance the expenditure.
Swap banks that are traders stand ready to take just one side of the swap now, then later find a client for the other side.
Swaps are off-book transactions for both counterparties and the swap bank - they do not appear as either assets or liabilities on the balance sheet, they are included in the footnotes of financial reports.
spruce.flint.umich.edu /~mjperry/466-10.htm   (3313 words)

  
 Interest Rate Swap Agreements
In the years 1995 to 1997 the Company entered into interest rate swaps to reduce the aggregate exposure to changes in floating interest rates and fair market value fluctuations of the debt portfolio.
The floating rate is based on EURIBOR and enables the company to participate from current low short-term interest rates.
The following table indicates the types of swaps in use at December 31, 2003 and 2002, and their weighted-average interest rates and the weighted-average remaining terms of the interest rate swap contracts.
ar2003.telekom.at /i_Inter_14242.html   (157 words)

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