Basis swap: Difference between revisions
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A swap that exchanges two floating interest rates, each being calculated on a different basis. | ''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. | 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. | ||
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== See also == | == See also == | ||
* [[Floating rate]] | * [[Floating rate]] | ||
* [[Hedger]] | |||
* [[Hedging]] | |||
* [[Interest rate swap]] | * [[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.
