Interest rate swap: Difference between revisions
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imported>Doug Williamson m (Spacing 22/8/13) |
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(IRS). A longer-term interest rate derivative. | (IRS). | ||
A longer-term interest rate derivative. | |||
An IRS is similar in its effect to a Forward Rate Agreement (FRA). | An IRS is similar in its effect to a Forward Rate Agreement (FRA). | ||
An IRS - like an FRA - is a contract for differences based on an agreed market interest rate. | An IRS - like an FRA - is a contract for differences based on an agreed market interest rate. | ||
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Other forms of capital market swap have been developed for the exchange of many other different types of cash flows and are used widely to hedge or transform a wide variety of related underlying exposures. | Other forms of capital market swap have been developed for the exchange of many other different types of cash flows and are used widely to hedge or transform a wide variety of related underlying exposures. | ||
== See also == | == See also == | ||
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* [[Swap]] | * [[Swap]] | ||
* [[Swap rate]] | * [[Swap rate]] | ||
Revision as of 15:03, 22 August 2013
(IRS).
A longer-term interest rate derivative.
An IRS is similar in its effect to a Forward Rate Agreement (FRA).
An IRS - like an FRA - is a contract for differences based on an agreed market interest rate.
But the IRS usually has multiple future interest calculation and settlement dates, and is used by a corporate to hedge or transform longer term interest rate exposures.
For example, an interest rate swap might be used to transform a longer term floating rate borrowing into a synthetic fixed rate borrowing.
(Whereas an FRA is for the shorter term and for a single settlement receipt or payment.)
Other forms of capital market swap have been developed for the exchange of many other different types of cash flows and are used widely to hedge or transform a wide variety of related underlying exposures.
