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This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
30 June 2012
interest rate swaps concepts
17 July 2012
An interest rate swap is on a simple basis an exchange of cash flows based on interest rates of a predecided prinicpial at regular intervals.
In its simplest form,
an Int Rate Swap works like:
Principal: $100M
Fixed Rate payer - 5%
Floating rate - LIBOR based
If :LIBOR is 6% on settlement day, (assumed 1 yr)
FLoating rate payer party pays a net of $1M (6-5)% * $100M to fixed rate party.
IRS payments are almost always netted.
In its simplest form,
an Int Rate Swap works like:
Principal: $100M
Fixed Rate payer - 5%
Floating rate - LIBOR based
If :LIBOR is 6% on settlement day, (assumed 1 yr)
FLoating rate payer party pays a net of $1M (6-5)% * $100M to fixed rate party.
IRS payments are almost always netted.
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