Basis swap: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Administrator
(CSV import)
 
(Remove surplus link.)
 
(6 intermediate revisions by one other user not shown)
Line 1: Line 1:
A swap that exchanges two floating interest rates, each being calculated on a different basis.  For example, 3-month LIBOR against 6-month LIBOR, or LIBOR against Prime.
''Interest rate swaps.''
 
A basis swap is a swap that exchanges two floating interest rates, each being calculated on a different basis.   
 
 
The use of a basis swap for hedging is to transform a borrowing or deposit with interest calculated on a particular basis, into a synthetic liability or asset with interest effectively calculated on an alternative basis. 
 
This alternative interest basis being considered preferable by the hedger.
 
 
Basis swaps are sometimes known as ''floating/floating'' swaps, because one floating rate is exchanged for another.


The use of a basis swap for hedging is to transform a borrowing or deposit with interest calculated on a particular basis, into a synthetic liability or asset with interest effectively calculated on an alternative basis.  This alternative interest basis being considered preferable by the hedger.


== See also ==
== See also ==
* [[Floating rate]]
* [[Hedger]]
* [[Hedging]]
* [[Interest rate swap]]
* [[Prime]]
* [[Swap]]
* [[Swap]]
* [[Synthetic]]


[[Category:Manage_risks]]

Latest revision as of 03:12, 5 October 2024

Interest rate swaps.

A basis swap is a swap that exchanges two floating interest rates, each being calculated on a different basis.


The use of a basis swap for hedging is to transform a borrowing or deposit with interest calculated on a particular basis, into a synthetic liability or asset with interest effectively calculated on an alternative basis.

This alternative interest basis being considered preferable by the hedger.


Basis swaps are sometimes known as floating/floating swaps, because one floating rate is exchanged for another.


See also