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What is the relationship between swap rates and par yields?
The swap rate for a particular maturity is the average of the bid and offer fixed rates that a market maker is prepared to exchange for LIBOR in a standard plain vanilla swap with that maturity. The swap rate for a particular maturity is the LIBOR/swap par yield for the maturity. The swap rate can also be defined as the fixed rate in an interest rate swap that causes the swap to have a value of zero.
What is the Difference between interst rate swap and interest rate future?
The simple answer is that an Interest Rate Swap (IRS) is Over The Counter (OTC) while a Futures Contract is Exchange Traded.
Is a cross currency swap an FX transaction?
A cross surrency swap has elements of both currency and interest rate transactions.
What is overnight index swap?
An Overnight Index Swap (OIS) is an interest rate swap involving the exchange of an overnight (floating) interest rate for some fixed interest rate. OIS's are mainly used by banks to hedge the risk inherent in overnight interest rate fluctuations. By swapping floating/fixed interest rates, banks can insulate themselves to some extent from any adverse interest rate swings. *Keep in mind that forex markets are active 24/7 because when one major financial center like London is closing for the night, another is opening in the morning somewhere else in the world.
When to use Eurodollar Futures and not Interest Rate Swaps for interest rate risk?
They are basically the same. A swap is like a sequential series of ED futures. There is a minor difference in that the ED futures have no convexity, while the swap does. In most cases, to the end user, this is relatively inconsequential.
What is the relationship between swap rates and par yields?
The swap rate for a particular maturity is the average of the bid and offer fixed rates that a market maker is prepared to exchange for LIBOR in a standard plain vanilla swap with that maturity. The swap rate for a particular maturity is the LIBOR/swap par yield for the maturity. The swap rate can also be defined as the fixed rate in an interest rate swap that causes the swap to have a value of zero.
What is the Difference between interst rate swap and interest rate future?
The simple answer is that an Interest Rate Swap (IRS) is Over The Counter (OTC) while a Futures Contract is Exchange Traded.
Is a cross currency swap an FX transaction?
A cross surrency swap has elements of both currency and interest rate transactions.
What is overnight index swap?
An Overnight Index Swap (OIS) is an interest rate swap involving the exchange of an overnight (floating) interest rate for some fixed interest rate. OIS's are mainly used by banks to hedge the risk inherent in overnight interest rate fluctuations. By swapping floating/fixed interest rates, banks can insulate themselves to some extent from any adverse interest rate swings. *Keep in mind that forex markets are active 24/7 because when one major financial center like London is closing for the night, another is opening in the morning somewhere else in the world.
Definition of Interest rate swap?
In Interest rate swaps, each party agrees to pay either a fixed or a floating rate in a particular currency to the other party. The fixed or floating rate is multiplied with the Notional Principal Amount (NPA) say Rs. 1 lac. This notional amount is not exchanged between the parties involved in the Swap. This NPA is used only to calculate the interest flow between the two parties. The most common interest rate swap is where one party 'A' pays a fixed rate to the other party 'B' while receiving a floating rate which is pegged to a reference rate like LIBOR
When to use Eurodollar Futures and not Interest Rate Swaps for interest rate risk?
They are basically the same. A swap is like a sequential series of ED futures. There is a minor difference in that the ED futures have no convexity, while the swap does. In most cases, to the end user, this is relatively inconsequential.
What is par swap rate?
Par Swap rate is the rate which makes the swap value 0.
What are interest rate swaps?
In interest rate swaps, each party agrees to pay either a fixed or a floating rate in a particular currency to the other party. The fixed or floating rate is multiplied with the Notional Principal Amount (NPA). This notional amount is not exchanged between the parties involved in the swap. This NPA is used only to calculate the interest flow between the two parties. The most common interest rate swap is where one party 'A' pays a fixed rate to the other party 'B' while receiving a floating rate which is pegged to a reference rate like LIBOR.
Company A and B are offered the following interest rates on a loan of Rs5 million by their banks You are required to construct an interest rate swap for these firms netting 0.5 percent?
Q.No: 2. Company A and B are offered the following interest rates on a loan of Rs.5 million by their banks. You are required to construct an interest rate swap for these firms netting 0.5% to the bank acting as intermediary and be equally attractive to A and B Company Fixed Rate Floating RateA 15% MIBOR +2%B 18% MIBOR +2.5%
Is a spot trade a derivative?
'Spot' refers to standardised settlement. You can have spot FX (not a derivative) but you can also have a spot Interest Rate Swap, which is a derivative.
When was The Life Swap created?
The Life Swap was created in 1974.
What is the difference between IRS and cds?
Both Interest rate swap and Credit default swap carries a different kinds of inherent risks. In IRS two parties involved together to swap the fixed rate v/s floating rate of swaps or vice versa whereas in CDS it is more like Default insurance where the purchase of CDS pays a regular premium to the seller of the instrument in return for a guarantee of payment in event of fixed assets turns sour.
