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As OTC instruments, interest rate swaps (IRSs) can be customised in a number of ways and can be structured to meet the specific needs of the counterparties. For example: payment dates could be irregular, the notional of the swap could be amortized over time, reset dates (or fixing dates) of the floating rate could be irregular, mandatory break clauses may be inserted into the contract, etc.
An amortizing swap is usually an interest rate swap in which the notional principal for the interest payments declines during the life of the swap, perhaps at a rate tied to the prepayment of a mortgage or to an interest rate benchmark such as the LIBOR. It is suitable to those customers of banks who want to manage the interest rate risk ...
In the United States, the spread is based on the LIBOR Eurodollar rate and the Federal Reserve's Fed Funds rate. [2] LIBOR is risky in the sense that the lending bank loans cash to the borrowing bank, and the OIS is stable in the sense that both counterparties only swap the floating rate of interest for the fixed rate of interest. The spread ...
In recent years, interest rate swaps have become an important component of the fixed-income market. With an interest rate swap, investors will typically exchange or swap a fixed-interest payment ...
Swaptions, which are options on interest rate swaps, are one segment of the more than $600 trillion over-the-counter rate derivatives market. Rate swaps measure the cost of exchanging fixed-rate ...
The local authorities swaps litigation (sometimes called simply the swaps cases [1]) refers to a series of cases during the 1990s under English law relating to interest rate swap transactions entered into between banks and local authorities. [2]
Central bank liquidity swap is a type of currency swap used by a country's central bank to provide liquidity of its currency to another country's central bank. [1] [2] In a liquidity swap, the lending central bank uses its currency to buy the currency of another borrowing central bank at the market exchange rate, and agrees to sell the borrower's currency back at a rate that reflects the ...
The concept of the interest rate swap was developed by the Citicorp International Services unit in 1980 but cross-currency interest rate swaps were introduced by the World Bank in 1981 to obtain Swiss francs and German marks by exchanging cash flows with IBM.