Swap Break Clauses

From ACT Wiki
Jump to navigationJump to search

Risk management.

Swap break clauses give the right to a bank as the seller to call for termination or re-pricing periodically during the life of a long term swap.

They were initially sold as a means of managing the fixed rate leg of a long term interest rate swap because banks could price the long term swaps as medium term deals based on the time period to the next break date.

Post-2008 regulation means they now carry a capital cost for banks and termination or re-pricing has been known to be called by the bank.

See also