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An interest rate swap's (IRS's) effective description is a derivative contract, agreed between two counterparties, which specifies the nature of an exchange of payments benchmarked against an interest rate index. The most common IRS is a fixed for floating swap, whereby one party will make payments to the other based on an initially agreed ...
The interest rate derivatives market is the largest derivatives market in the world. The Bank for International Settlements estimates that the notional amount outstanding in June 2012 [3] were US$494 trillion for OTC interest rate contracts, and US$342 trillion for OTC interest rate swaps.
While the market for currency swaps developed first, the interest rate swap market has surpassed it, measured by notional principal, "a reference amount of principal for determining interest payments." [15] The Bank for International Settlements (BIS) publishes statistics on the notional amounts outstanding in the OTC derivatives market.
A swap can be a derivative of several different underlying elements, including commodities, stocks, foreign exchange and interest rates. A typical swap contract might involve the exchange of a ...
In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. It has pricing associations with interest rate swaps (IRSs), foreign exchange (FX) rates, and FX swaps ...
An overnight indexed swap (OIS) is an interest rate swap (IRS) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded overnight rate over the floating coupon period. Note that the OIS term is not ...
A zero coupon swap (ZCS) [1] is a derivative contract made between two parties with terms defining two 'legs' upon which each party either makes or receives payments. One leg is the traditional fixed leg, whose cashflows are determined at the outset, usually defined by an agreed fixed rate of interest.
An equity swap is a financial derivative contract ... a floating interest rate (LIBOR +0.03%) on the £5,000,000 notional and would receive from Party B any ...